Record year for deal activity as investors target tech, e-fulfilment and international supply chains

The UK logistics and supply chain management sector saw a record year of deal activity in 2021, as the industry overcame the challenges of the three Cs – Covid-19, Christmas and customs - in the final quarter of the year.

Transaction volumes reached a record high in 2021, with 66 deals completed last year at a disclosed deal value of £2.7 billion. Nearly a third of deals (20) were completed in Q4 – the highest quarterly volume since BDO’s market research began in 2016.

According to the latest report from accountancy and business advisory firm BDO LLP, the ‘UK & Ireland M&A Update – Q4 2021’, a quarter of deals last year were tech-related. In the final quarter of the year, 50% of deals were cross-border, with 30% of Q4 transactions involving private equity.

The report also highlighted that the BDO Logistics FTSE Index showed a 36% increase in 2021, reflecting the sector’s profile and increased demand during the pandemic. Given the peak seasonal trading, the index reported an increase of 6% in Q4, following the previous quarter’s decline amidst concerns around labour shortages, Brexit and supply chain issues.

Jason Whitworth, M&A partner at BDO LLP, explained: “Despite what has undoubtedly been a challenging year, the sector’s resilience is highlighted by the level of investor appetite. Increasingly, they’re targeting growth opportunities in tech enablement, e-fulfilment and international supply chains.

"Meanwhile, trade buyers continue to see significant benefit in consolidation, as cash rich corporates look to expand value added services, cross-sell and up-sell to customers, and achieve geographic expansion.

“Deal activity continues to drive company valuations, as a shortage of quality assets, coupled with funding liquidity, drives competition. As such, we continue to see real value for shareholders in the current market, whether in raising investment capital, de-risking, or seeking a full exit.”

Prominent Q4 deals included the sale of sea freight services provider, Cargo Marketing Services to MSL Corporate – an Argentina-based multi-national logistics enterprise; the MBO of Mandata, backed by UK private equity business Tenzing; Danish Scan Global logistics acquisition of c. £1bn revenue freight forwarder Horizon International Group; and The Delivery Group’s continued buy & build expansion with its acquisition of E-Trak. Institutional investment interest continued as Winch & co acquired Eclipse Distribution, and US PE house McLarty Capital Partners acquired ParcelHero.com.

Whitworth added: “Moving in to 2022, priorities in the sector are shifting towards environmental, social and governance issues, as the expectations of consumers continue to drive demand.

“Changes in the asset base of providers, moving towards a more electric fleet, is just one area where we are anticipating an accelerated take up. This is further backed by the UN Global Compact Business Ambition for delivering the 1.5ºC warming target. In addition, the real impact of Brexit will come to light. However, as we have seen over the course of the last two years, the sector will continue to adapt to both legislative changes and managing further supply chain constraints.”