The combination of extraordinarily loose monetary conditions and greater confidence in a slow global recovery has raised the possibility of a ‘wave of cash’ hitting the corporate sector in the near future. This cash pile has been estimated at around £4.1 trillion, held both on corporate balance sheets and investment institutions with private equity houses having raised particularly large amounts recently.
Non-financial companies can return the cash to shareholders, as for example A.P. Moller-Maersk is doing. However those with more ambitious growth plans will look to invest, either in organic growth or through mergers & acquisitions (M&A) activity. Certainly, with cross-border acquisitions up by 127% so far this year, the evidence suggests that M&A are the more attractive option. In contrast the options for financial companies are more limited. For the likes of the PE sector no investment means no fees.
What relevance does this have for the logistics industry? Obviously there is no good reason why the sector should be immune to this trend. As a whole, the industry is driven by economic growth and as such has seen a recovery in the past five years. However, there are also a number of micro-economic drivers which have created good market conditions for M&A.
Even in Europe, the conditions exist for an increased level of M&A activity as traditional retailing patterns change, near-sourcing and re-shoring gather momentum and logistics companies seek to add value to their highly commoditised operations.
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