Q2 2024 Freight-View

Freight-View

The Freight & Logistics sector experienced lingering challenges during the second quarter of 2024. In an attempt to capitalise on this landscape, many forwarders pursued strategic acquisitions, focusing in on particular geographies and niche specialisms. Given interest rates failed to decrease in line with inflation, growth by acquisition in the Freight sector showed some resilience, particularly as conditions remained volatile from a macroeconomic perspective.

M&A deal volume was down on Q1 though, despite shipping rates surging due to challenges and setbacks in the red sea.

If we focus on the ocean freight market, spot rates from China continued to rise, with rates from Shanghai to California nearly five times higher than 2023. Q2 witnessed the early introduction of weekly peak season surcharges (PSS) on all Asia outbound trades, capitalising on the rising demand.

Looking at the air freight market, rates continue to rise fuelled by strong ecommerce demand and worsening ocean freight disruption. Rates are particularly high on routes from Asian and Middle East origins to Europe. Sustained e-commerce growth, further global shipping disruptions and rising demand for high-tech, perishables and consumer goods continue to boost air cargo volumes. Air capacity is up YoY in Q2 and remains steady, driven by belly cargo growth.

Three key themes witnessed in Freight & Logistics M&A to be discussed are European Consolidation, Freight Management Software, and Temperature Controlled Logistics.

European Consolidation

A European consolidation theme was witnessed during the second quarter of 2024, particularly notable within Spain, Italy, and the UK. Essentially displaying the demand and perhaps near-term organic prospects of the continent.

Within the Spanish market, Dachser acquired Valencia based forwarder Transportes Martinez Albert. ‘TMA’ had acted as Dachser’s partner in the region for more than 30 years with well-established relationships between both companies.

Italy witnessed two significant deals within the forwarding sector, Scan Global Logistics acquired Foppiani Shipping Logistics in April. Foppiani is a leading Prato based freight forwarder, specialising in air and ocean services within the fashion, furniture, high-end Italian products and automotive industries.

Further activity presented with the acquisition of Multilogistics by Jas, strengthening their European presence while also enhancing its service offering. Multilogistics is well-rounded, offering forwarding, warehousing, distribution and supply chain management.

Consolidation continued in the UK, examples include the investment in Britam Shipping by Emerge. The Essex headquartered shipping and logistics company reinforces the forwarding offering of Emerge whilst enhancing operational trade lanes to Latin American and South-East Asia.

Freight Management Software

Q2 witnessed a series of acquisitions within the Freight tech sector. With technology advancing and many strategic forwarders viewing software as an efficiency enhancer, deals in this area are interesting. The Freight-Software industry is expected to grow 10% by 2031 according to the Market Research Guru.? Blue Yonder, a leader within the freight software space, announced a binding agreement in Q2 to acquire One Network, based in Texas USA, in an effort to create an ecosystem that ensures multi-enterprise optimisation, the acquisition price was c. $839 million.

An additional move observed in Q2 was the formation of ‘Forward Computers Alliance Ltd’ between three of the UK’s largest and longstanding freight forwarders, consisting of The Cardinal Partnership, Davies Turner, and Woodland Group. The three came together to acquire UK software firm - Forward Computers from the Freight Software Group.?

Descartes continued their strategy for inorganic growth with their most recent acquisition of Boxtop Technologies, another UK-based freight software firm, for approximately ￡10.25 million.?

Boxtop Technologies is an existing Descartes partner and specifically offers freight management IT solutions for small to mid-sized logistics service providers, helping manage the lifecycle of shipments.

Temperature Controlled

The temperature-controlled logistics sector encountered further M&A activity in Q2. The Cold Chain Logistics market is predicted to grow 14.8% annually. To strengthen its food logistics position, Dachser acquired German provider Brummer Logistik. As a leader in food logistics in Central Europe, this acquisition allows Dachser to solidify that position. The Brummer group generated €128 million in 2023, Dachser’s continued interest in food logistics shows the confidence they have in the market.

Constellation Cold Logistics, the third largest cold storage owner-operator in Europe, was sold to EQT. Although details of the deal were not disclosed, Constellation Cold Logistics is expected to generate revenues of over €150 million in 2024. These notable deals confirm market sentiment, and further reiterate a view on growth potential. Arguably the biggest news during Q2 in this subsector was the cold storage giant, Lineage, disclosing their intentions to pursue an initial public offering in the U.S, seeking to raise c $4billion dollars from an IPO. Given the recent lack of appetite in the IPO market, the timing of this from a public market’s perspective is interesting and demonstrates Lineage’s confidence in future growth.

Conclusion

With the uptick in freight rates and business confidence likely leading to increased volumes, as we head into H2 2024, we envisage M&A volumes to creep upwards. Target valuations are beginning to fall in line with acquirers’ appetite for risk which naturally helps deals consummate.

No easy or quick resolutions to global conflicts, the US–China relationship during an election year will be fascinating when we consider the impact it could have on global trade. For corporate/strategic buyers, the need for M&A with the speed of change and disruption in the market is key and momentum can change quickly, even in a climate of uncertainty with interest rates still high and buyer’s valuations below seller’s expectations. It won’t take much of a shift to see a surge in confidence and thus global M&A activity and deal completions.

H2 could see the culmination of the much talked about DB Schenker deal, now with only two parties left in the bidding process it will be interesting to see if the German state commit to one party and move forward with a sale, or could they decide to retain control of the prized asset... let’s wait and see on that one.