UK logistics sector an investment magnet for foreign buyers

3 July 2024

UK logistics sector an investment magnet for foreign buyers

In the first quarter of 2024, 38% of deals in the logistics and supply chain management sector were cross-border, underscoring the growing interest from international investors.

Noteworthy transactions included Elanders' acquisition of Bishopsgate Specialist Logistics, Yusen-owned ILG's acquisition of Global Freight Solutions, and Hapag Lloyd's acquisition of ATL Haulage Contractors.

While cross-border activity rose, overall deal activity in the sector saw a slight decline in Q1. From January to March 2024, 26 transactions were completed, compared to 27 in the previous quarter. However, the total disclosed deal value surged to £372 million, up from £53 million in the previous three months.

BDO's 'UK M&A Update – Q1 2024' highlighted that 42% of deals in the first quarter were tech-related, showing that innovation is a key market driver as companies seek to enhance operational performance and improve margins.

Vinod Patel, Transaction Services partner at BDO LLP, noted: "Following on from 2023, we continue to see venture capital targeting next-generation technology and growth. Investment in the robotics and drone delivery sectors is gaining momentum. While still in its infancy, drone technology is poised to revolutionize delivery services, enhancing speed, efficiency, and accessibility.

"Overseas interest has intensified due to a scarcity of quality mid-market businesses not already controlled by larger global groups. This has created a valuable opportunity for businesses that are building scale and offering differentiated services."

Significant deals also included London-based Skyports' Series C funding led by Spain-based ACS Group. The $110 million funding will advance Skyports' Infrastructure and Drone Service business.

Other notable acquisitions included UK logistics company EFS Global acquiring pallet and parcel distribution specialists Leeds Parcel Company, Pass the Parcel, and YDL. Additionally, 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, a growing UK-based logistics platform.

Patel added: "Since late 2023, we have seen a steady stream of deal activity as companies strive to overcome past uncertainties and prepare for the future. There has been a rise in bolt-on strategic acquisitions to bolster growth and build scale.

"Noticeably, there was a lack of primary private equity investment in Q1, with only one direct investment by HIG, which acquired DX Group. Private equity firms seem to be waiting for clearer signs of industry-wide trading performance improvement before committing to new investments. However, private equity-backed or cash-rich logistics firms continue to consolidate, developing their buy-and-build strategies."

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

John Gethen, M&A Director at BDO, stated: "The geopolitical issues that have impacted the sector in recent years seem to have largely settled, as businesses adopt new methods to manage supply chain challenges, allowing for greater flexibility in global cargo transport.

"However, the biggest theme from the event, which featured prominent players in the regional logistics market, is the pressure on profit margins. Navigating these financial challenges will remain a key focus throughout 2024 and beyond, as cost pressures continue to be acute."