Lincoln International's Dirk Engelmann and Gaurang Shastri discuss the state of the transportation and logistics market.

Regional Dynamics:

• US: The US economy has shown positive signs, but non-service sector growth remains subdued, limiting logistics growth.
• Europe: Economic recovery is slow, particularly in Germany.
• China: Despite challenges, structural resilience and government spending have supported a 5.3% annual production output growth in October 2024.

M&A Activity in 2024: A Year of Consolidation Dominated by Small and Mid-Sized Deals

The announcement of DSV’s acquisition of Schenker in September has been the most significant transaction in the sector this year. The merger will create the world’s largest 3PL provider, generating over €39 billion in revenue. While the combined group will account for only 6-7% of the global 3PL market, it underscores the industry’s high degree of fragmentation.

The impact of this merger on sector consolidation in 2025 remains uncertain. Unsuccessful bidders may intensify mid-sized acquisition activity, or competitors might feel compelled to scale up in specific areas through M&A, such as European road freight or certain trade lanes.

We do not anticipate any risks to the completion of DSV’s transaction related to the German general elections in February 2025. The deal has already been approved under the Federal Budget Code (BHO) in October, and a new German government will likely prioritize other urgent policy issues.

Beyond this mega-deal, as in 2023, M&A activity in the T&L sector, encompassing forwarding, contract logistics, courier, express, and parcel (CEP), and road freight, has been dominated by smaller and mid-sized deals.

Strategic acquirers and private equity-backed consolidation platforms have capitalized on industry fragmentation to pursue add-on acquisitions, aiming to expand geographically and enhance their capabilities. Our analysis indicates a slight increase in buy-and-build activity across forwarding, road freight, contract logistics, and CEP, accounting for approximately 20% of observed deals.

Acquirers Remain Focused on Contract Logistics and Resilient Verticals

As in previous years, key M&A motivations centered around achieving differentiating end-to-end capabilities to facilitate cross-selling, increase the stickiness of BCO relationships, and strengthen exposure to attractive verticals such as pharma and healthcare, food, high-tech, and e-commerce.

Notable transactions in healthcare logistics include Nippon Express’ purchase of Simon Hegele, a Germany-headquartered specialist in medtech and pharma contract logistics, and UPS acquiring Frigotrans, also Germany-based and active in pharma transport and warehousing. Additional examples of listed 3PLs as drivers of consolidation in contract logistics were GXO with Wincanton and Bpost with Staci. Similar to the sale of Simon Hegele to Nippon Express, Bpost’s acquisition of France-based international contract logistics specialist Staci marked successful exits for private equity groups following the implementation of targeted buy-and-build strategies.

There has been significant deal activity in the CEP segment in the UK, with the €4.6 billion acquisition of IDS, owner of the Royal Mail and GLS, by Czech-based EP Holding and Apollo’s acquisition of parcel delivery provider Evri from a consortium of Advent and Otto Group.

2H 2024 Deals in Surface Transport Support  Long-Term Logistics Demand Recovery

As freight demand continued its long-term recovery in the second half of 2024, several strategic acquisitions took place. In the US, notable deals included RXO’s acquisition of freight broker Coyote in August, Kuehne+Nagel’s majority stake purchase of marine drayage provider IMC, and Schneider’s acquisition of contract carrier Cowan Systems, both in November. Similarly, significant transactions in Europe included MSC’s acquisition of UK-based Maritime Group in September and DFDS’s completion of the purchase of Ekol in November.

Outlook for 2025 Based on Positive Macro Forecasts and Improved Sentiment

The expected continuation of the logistics demand recovery should foster a favorable environment for T&L deal-making in 2025. The WTO forecasts a 3.0% increase in world merchandise trade. While economic growth is expected to slow in major European economies, strength in the US economy and export growth in Asia will offset these declines.

Furthermore, positive shifts in global business sentiment, fueled by the US elections in November and anticipated business-friendly outcomes of other international elections, bode well for the industry. A recent Teneo poll of 300 international executives in early December 2024 revealed that 77% of CEOs expect global economic improvement in the first half of next year, up from 45% the previous year. These executives also predict increased deal activity and easier access to capital in the coming year.  Further, our own survey of attendees at a panel we hosted at the BVL Supply Chain Congress and Expo in Berlin in October indicated over 80% of respondents expect  the current freight recession to end by the second half of 2025.

Uncertainty in  Trade Policies and a Potential Labor Strike May Delay Deal-Making Until the 2nd Half of 2025

Recent conversations with executives and investors have revealed uncertainty surrounding the potential imposition of additional tariffs by the new US administration and the possibility of east coast labor strikes.  This uncertainty may lead many players to postpone M&A decision-making until the policy and labor implications become clearer.  Given this, we expect potential sellers of T&L businesses with exposure to international trade to delay market launches until there is more visibility.

Tariffs Will Accelerate  Near-Shoring  and Benefit Domestically Focused LSPs

The proposed introduction of higher or additional tariffs is expected to benefit US trucking and domestic logistics services while potentially challenging international shipping and freight forwarding. Other potential policy changes, such as tax and regulatory reductions, could stimulate economic growth, leading to increased demand for logistics services in the US.

Tariffs and retaliatory measures may further accelerate the near-shoring trend, increasing the need for global 3PLs to strengthen their surface (road and intermodal) capabilities across regions to complement international air and ocean networks and adequately serve global BCOs.

Additional complexities, including shifting tariffs and regulations, may positively impact forwarding and customs brokerage. Shippers will increasingly rely on service providers to maintain agile and efficient supply chains in the face of these dynamic conditions.

T+L M&A Market May Become Crowded in the 2H of 2025

Since the end of the pandemic, the T&L sector has experienced a severe freight recession and a correction of pandemic-era market excesses. While logistics demand began to recover in 2024, coinciding with a new interest rate reduction cycle, most private equity owners of T&L assets in Europe and the US have retained their pre-pandemic and pandemic-era holdings. In many cases, they have sought to capitalize on weaker market conditions since early 2022 by pursuing additional acquisitions.

These private equity funds are now facing increasing pressure from their limited partners to return capital through portfolio company sales. We anticipate that many of these funds will prepare their T&L companies for exit processes as early as mid-2025. This could lead to a crowded M&A market, potentially overloading the bandwidth of M&A teams at potential buyer companies.

Additionally, privately held T&L businesses in certain subsegments may feel compelled to transact due to changing market dynamics, technology investment needs, or shifts in customer vertical demand. These businesses may explore mergers, acquisitions, or other partnerships to address these challenges.

These developments could pose challenges for potential sellers, particularly those not immediately ready to launch a sale process after tariff regimes stabilize. Conversely, private equity and strategic acquirers may have significant opportunities to execute acquisitions relatively early in the cycle.

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