UK logistics sector an investment magnet for foreign buyers

In the first quarter of 2024, 38 per cent of deals in the sector were cross-border, highlighting growing interest from international investors.

High profile transactions included Elanders’ acquisitions of Bishopsgate Specialist Logistics, Yusen-owned ILG’s acquisition of Global Freight Solutions and Hapag Lloyds’ acquisition of ATL Haulage Contractors.

The rise in cross-border activity comes as overall deal activity in the sector fell marginally in Q1. Between January and March 2024, 26 transaction were completed, compared to 27 in the previous quarter. However, total disclosed deal value rose to £372 million, up from £53m for the previous three months.

According to BDO's ‘UK M & A Update – Q1 2024’, in the first quarter of the year 42 per cent of deals were tech-related, demonstrating that innovation is a driving force in the market, as companies seek to optimise operational performance to improve margins.

Vinod Patel, Transaction Services partner at BDO LLP, said: “Following on from 2023, we continue to see venture capital targeting next generation technology and growth. Investment activity within the robotics and the drone delivery operations sector is still gaining momentum.

“Albeit in its infancy, there is an argument that drone technology is paving the way for a revolution in delivery services, offering a sneak peek at a future where speed, efficiency and accessibility are dramatically enhanced.

“When it comes to overseas interest, with a scarcity of quality mid-market businesses not already controlled by larger global groups, there has been heightened interest in remaining opportunities, creating a real value end game for those businesses building scale and a differentiated service offering.”

Deals also included London-based Skyports Series C funding led by Spain-based ACS Group, a key player in the infrastructure and construction industry. The $110m funding is set to be instrumental in advancing Skyport’s Infrastructure and Drone Service business.

Elsewhere, UK logistic company EFS Global acquired pallet and parcel distribution specialists Leeds Parcel Company, Pass the Parcel and YDL; and UK delivery and logistics service provider Yodel Delivery was acquired by YDLGP, a newly formed company backed by a consortium of investors, including boutique investment bank Solano Partners Ltd, and the leadership team behind Shift, the growing UK-based logistics platform.

Patel added: “Since the latter part of 2023, we have seen a steady stream of deal activity as companies strive to shake off the uncertainties of the past and gear up for the future. There has been an increasing number of bolt-on strategic acquisitions to bolster business growth and build scale.

“What is noticeable about deal activity in Q1 is the lack of primary private equity investment, with only one direct investment deal during the quarter by HIG, which acquired DX Group.

"Private equity firms appear to be in a holding pattern, waiting for clearer signs of industry-wide trading performance improvement before committing to new investment. However, private equity backed or cash-rich logistic firms are continuing to consolidate, developing their buy-and-build strategies.”

The publication of BDO’s M & A report follows a joint East Anglia event with the firm and Barclays Corporate, where some of the region’s leading logistics and supply chain management providers discussed the challenges and opportunities facing the sector in 2024.

John Gethen, M & A Director at BDO, said: “The geo-political issues that have been impacting the sector in recent years appear to have largely settled down, as businesses incorporate new ways of managing supply chain challenges to give them more flex when it comes to transporting cargo around the world.

“However, the biggest theme that came out of the event, which featured some of the most prominent players in the regional logistics market, is certainly the pressure being placed on profit margins.

"The task of trying to make the numbers work in an economic environment where cost pressures are still acute, is extremely difficult and navigating those financial challenges will remain a key focus throughout the rest of 2024 and beyond.”