Q2 Freight-View

As we conclude another quarter of 2023, M&A activity has mirrored much of the same trajectory we saw in Q1. Whilst appetite from strategic buyers and financial investors has continued, many have opted for a ‘wait and see’ approach, given the sustained volatility in the market and increased cost of capital. On the other hand, some have viewed the challenging environment as an ideal time to get out in front and proactively look for deals to transact on, given reduced buy-side competition and fewer sell-side deals coming to market.

We’ve seen some indication of this in Q2 as M&A activity has increased from Q1 for the freight and logistics sector. We feel this trend will continue into H2. Speculation around potential tax changes in a looming UK general election typically cause a spike in M&A activity, as previously seen in 2021.

Deal momentum in freight and logistics may have increased due to wider events in the global supply chain. Declining container rates and reduced consumer demand has continued and annual revenues for most Freight Forwarders will have seen reductions YoY, normalising in many cases, back to pre-pandemic levels. For strategic M&A buyers, this has made the valuation of companies easier again and consequently, deal structures and negotiations more easily approached.

Continued interest in German Air & Ocean market

As the largest economy in Europe, Germany has long been a priority for operators in the freight forwarding market. As a central hub for transportation, with highly developed infrastructure and technologies, Germany is considered the largest European logistics market and Connect CF have been contacted by many strategic acquirers who are interested in enhancing their footprint in the region, as well as some looking to enter the market for the first time. This has also been evident in the transactions concluded in the market between April – June.

Scan Global Logistics’ (SGL) acquisition of ETS Transport & Logistics in June adds scale to the group’s existing German operation. ETS features in the Top 50 ocean freight forwarders list, with a branch in Hamburg and two additional warehouses, the acquisition improves SGL’s footprint across Germany.

SGL’s CEO - Allan Melgaard, commented 'increasing our foothold in the world's 4th largest logistics market supports SGL's strategic focus, considering Germany's importance as a global trading partner.'

In addition, we saw Gebruder Weiss strengthen its air & sea network in Germany, through the acquisition of B+A in Nuremberg. As one of the most important cities in Germany for logistics, GW already had a branch in Nuremberg, which is concentrated on land transport and logistics services. The acquisition of B+A’s facilities will give them opportunity to develop air and sea services enabling a broader service offering for customers in the metropolitan area.

We also saw interest this quarter from German forwarders, looking to consolidate their presence elsewhere in Europe. At the beginning of May, The Geis Group completed on a majority purchase of Austria based Quehenberger Logistics, acquiring 66% of the shares. With a consolidated turnover of €2 billion, the group is becoming a leading player in Europe. The partnership will give customers access to a much larger network stretching from Luxembourg to the Black Sea and the Baltic Sea to the Mediterranean Sea. The Group now has 10,000 employees and it’s the largest transaction the Geis Group has undertaken.

Large cap transactions – consolidation

It is important to note that turbulent market conditions have not entirely halted larger transactions in the Logistics sector. With a sustained consolidation still occurring, we saw CMA CGM accelerate its diversification in the forwarding sector, issuing a bid to acquire Bolloré Group’s transport & logistics division. Completion of this deal would make CMA CGM a Top 5 global logistics provider, with combined operations and revenues of approximately USD 24 billion.

The deal is set to be CMA CGM’s largest transaction since inception, signifying a major milestone in the Group’s development. CMA CGM started its vertical integration plan in 2019 through the acquisition of CEVA Logistics, which has grown alongside the container shipping segment. A heavily discussed strategy, vessel operators continue to seek additional service streams in an attempt to cover more of the supply chain.

That wasn’t the only large transaction involving a top 30 global forwarder. Nippon Express closed the acquisition of Cargo Partner in April. The purchase price was c$743million and the combined entity is expected to become the fifth largest air forwarder by cargo volume globally. Much like the CMA deal, this is Nippon’s largest acquisition and will expand the group across Central and Eastern Europe substantially.

The topic of large scale transactions cannot be discussed without touching on the rumours surrounding DB Schenker and Geodis. Following reports back in December, the management board has agreed to prepare DB Schenker for a sale process, and investment banks have been instructed to assist with this. Since then, DHL issued comment that its business would be able to integrate a large acquisition of DB’s size.

Similar rumours emerged regarding French operator Geodis, however the CEO Jean-Pierre was quick to rule the claims out. SNCF is not intending to sell the subsidiary, given its position as ‘a pillar of the French railway’s global offering.’ Geodis is reported to have ‘sufficient size to compete with the leading players’ generating annual revenues of €11bn.

Renewed interest in UK Logistics

Q2 transactions also highlighted the appeal of the UK market amongst acquirers. Culina Group’s subsidiary Eventor acquired Stardes, strengthening its position in the event logistics sector. Culina, ultimately owned by German food giant Muller, announced its annual group turnover was more than ￡2.2bn last year.

Additionally, the acquisition of Maltacourt Global Logistics by Janssen Group demonstrated continued interest in the UK from overseas buyers. The acquisition was reported to align with the group’s strategic growth plans, in developing a strong position in the UK. With post-Brexit complexities, the aim is to enable a seamless logistics operation covering both the EU and the UK to benefit clients alike. Janssen have quickly established themselves in the UK and this transaction follows the closing of Norman Global Logistics in Q1,23.

EFS Global continued its domestic expansion through the acquisition of haulage operators, Gees Haulage and Tyneside Express Transport. The combination of deals was said to add 235 vehicles to its fleet and 115,000 sq ft of warehousing space. Whilst the value of the deals was private, it is estimated to increase EFS’ annual turnover to ￡100million.

It will be interesting to see if there is any progress made on large cap transactions in H2. At Connect CF, we are confident that the level of deals will slowly continue to rise as we approach 2024. As forwarders revenues and profits continue to normalise and the sustainability of earnings becomes clearer, we expect the M&A market to pick up momentum again, perhaps like the 2021/22 environment.