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One in three logistics leaders are more likely to undertake merger and acquisition activity than a year ago, survey shows
Close to a third (30%) of logistics leaders said they were more likely to undertake merger and acquisition (M&A) activity in the first quarter of 2021 than they were 12 months ago, according to the results of a joint interim survey by Logistics UK and CBW, a top 50 City firm of accountants.
Independent logistics research firm Analytiqa interviewed 100 senior executives in the logistics sector in Q1 2021 to form the basis of the survey. Given the current economic circumstances, CBW and Logistics UK wanted to give an interim update on expected M&A trends in the sector, as well as explore other issues in light of COVID-19 and Brexit, including whether the government has given enough support to the sector.
SENTIMENT TURNS POSITIVE
Taking insight from 100 senior industry executives, the UK Logistics Sector M&A Index measures key economic metrics. An Index reading of 50 means that sentiment towards M&A activity is unchanged, a number over 50 indicates positive sentiment, while anything below 50 suggests negative sentiment. In the third quarter of 2020, the Logistics sector M&A Index stood at 45.4, whereas by the first quarter of 2021, the Index had risen to 55.7, broadly indicating that sentiment is now in positive territory.
Optimism in the sector had also marginally increased from 6.3 out of 10 in Q3 2020 to 6.7 out of 10 by the first quarter of this year.
CONSOLIDATION LOOKS SET TO INCREASE
More than nine out of ten survey respondents (92%) reported that it is likely or very likely that consolidation, through M&A activity, will continue in the sector over the next 12 months, a small increase from last year.
This is borne out by increasing confidence in the financial value of logistics as a sector. Close to four out of ten respondents (39%) said valuations of logistics companies have increased in the past 12 months – a 17% rise on 2020, while almost six out of ten (57%) say valuations will continue to increase in the next year – a 30% rise on 2020.
The shift in attitude of logistics leaders towards M&A activity can be attributed to three main factors: a change in market and economic conditions, a change in their company’s performance and a change in company strategy.
BREXIT FEARS
Close to seven out of ten respondents (68%) said they expect Brexit and the UK’s new trading relationship with the UK to have a negative outcome for their business. However, fewer than one in five (17%) expected to lose turnover and clients as a result.
COVID CHALLENGES
When asked about their response to the unprecedented challenges of the pandemic, almost a third of respondents (31%) said it was to focus on the expansion or organic growth of their business. Tellingly, only half of business leaders said they were satisfied with the support provided to the UK logistics sector by the government in response to the COVID-19 pandemic.
NEXT STEPS
The success of the vaccine rollout and the reopening of significant sectors of the economy, including retail, hospitality and leisure, has led to a marginal increase in optimism among industry leaders. However, concerns remain, particularly over COVID-19, which some worry could prevent them from achieving their business objectives in the next 12 months.
David Wells, Chief Executive at Logistics UK, said: “With the ongoing success of the vaccine rollout, and as parts of the economy reopen, industry optimism for the next 12 months among our respondents has increased from the previous survey. And the sector is already thinking proactively about new business models and strategies in response to Brexit: our findings show that 23% of logistics operators expect to diversify their service offering. A successful, resilient logistics industry will be key as the economy reopens and, while many sectors of the economy are yet to fully bounce back, businesses across logistics will provide a good indicator of the health of the nation’s future ambitions for financial growth. As the business group representing the logistics sector, Logistics UK will continue working hard to alleviate any challenges to logistics operations to keep goods moving freely across the UK and further afield.”
To download the full report please click on the link below.
*www.cbw.co.uk/interimlogisticsreport2021
Published On: 29/04/2021 17:00:37
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