Will logistics sector M&A keep pace in 2022?

In 2021 logistics sector M&A saw major players looking to fill gaps in global networks and add specialisation in high-value sectors.

Logistics sector M&A activity was strong in 2021 as major players made a string of deals that expanded global coverage, deepened capability and widened value propositions. The pace of M&A was quick, and already in 2022 looks set to continue at a rapid pace.

Amongst the deals made in 2021 was Kuehne Nagel’s purchase of China-based air forwarder Apex International, a freight forwarder with a strong position in airfreight in China and Asia Pacific. While transaction details were not disclosed, it was reported at the time that K+N paid $1.5bn for the forwarder, with the deal coming a few months after K+N sold a large part of its contract logistics business in Europe which already suggested that the Swiss-based logistics provider was intent on re-orientating its business towards forwarding but also increasing its exposure to the Asia Pacific region. This is not very surprising in that Southeast Asia offers significant growth prospects. However, the degree to which this deal is exposed to airfreight is notable. Of course, K+N has a significant airfreight business already, however, the purchase of Apex makes it a leading player which is a statement of confidence in the future of the sector.

DHL Global Forwarding also joined the wave of acquisitions continues in the freight forwarding sector, with its purchase of the mid-sized German freight forwarder, J.F. Hillebrand Group. DPDHL is paying the equivalent of €1.5bn in debt assumption and equity. Explaining the rationale for the purchase, Tim Scharwath, CEO DHL Global Forwarding, Freight observed that “after concentrating on improving the business operationally, we are now able to direct our core business towards sustainably higher margins by broadening our reach and service offering in specialized segments”.

However, there was a further dynamic behind the acquisition, namely cheap money. Outgoing DPDHL CEO Frank Appel hinted at this in his comments at the time of the deal, saying that DPDHL was using its “financial strength” to “pursue quality investments while reinforcing our unchanged commitment to deliver on investor return expectations”. In other words, DPDHL can borrow very cheaply in capital markets enabling it to buy assets that will deliver higher returns on equity over the medium-term.

Two of the world’s largest shipping lines were also active in M&A markets during 2021. Maersk made no fewer than seven deals during the year, including several acquisitions in that expanded and deepened its offer in the e-commerce logistics market. These included the $838m acquisition of Visible Supply Chain Management, a US-based e-commerce logistics and parcel delivery company that was expected to allow Maersk’s business-to-consumer customers access to 75% of the US direct-to-consumer market within 24 hours, as well as the purchase of B2C Europe which specialised in parcel delivery from its base in the Netherlands. Further, in December 2021, Maersk announced the acquisition of LF Logistics, a Hong Kong-based contract logistics provider specialising in omnichannel and e-commerce logistics solutions. The deal adds some 223 warehouses across Asia Pacific to Maersk’s network which now covers 9.5m sq m globally.

CMA CGM meanwhile also made moves in the market. Like Maersk, the majority of its deal focussed on extending its offer beyond its core shipping business. Alongside air and intermodal forwarding acquisitions for at the CMA CGM Group level, subsidiary CEVA Logistics greed a Share and Asset Purchase Agreement with Ingram Micro to acquire “most” of the latter’s Consumer and Lifestyle Services (CLS) business. The deal includes Shipwire and the CLS technology forwarding operations in the Americas and Europe, with the remaining CLS business staying with Ingram Micro.

At the time of the deal, CMA CGM stated the newly combined CEVA Logistics and CLS entity will extend to 1,100 sites in 160 countries, with the CLS business adding $1.7bn in revenue to existing operations. The rationale behind the deal appears twofold. Firstly, CLS will complement CEVA’s existing e-commerce business with the addition of visibility, same-day delivery and reverse logistics operations. Secondly, the deal includes Shipwire which allows CEVA Logistics to integrate a cloud-based order fulfilment platform that targets SME e-commerce retailers. 

Perhaps not wishing to be left behind, it appears MSC is also keen to delve into M&A markets with rumours growing that it is set to acquire Bollore’s ports and logistics operations in Africa. The deal would include Bollore’s operations at 42 ports and 16 container terminals in the region, which generated more than €2bn in revenue. The early-stage deal sets an enterprise value of €5.7bn.

With demand for logistics services high, capacity short and rates at unprecedented levels, logistics service providers saw increased profitability in 2021. Alongside this, many more than just those above also saw conditions for M&A to expand and deepen geographic coverage and sector specialisation. The pace of M&A looks set to continue in the year ahead.

Source: Transport Intelligence, 4th January 2022

Author: Nick Bailey