Ten reasons why M&A activity in the global logistics industry is about to take off

The talks between DSV and UTi Worldwide which were revealed in the media last week show that there is an undiminished appetite for mergers and acquisitions in the global logistics industry. There were certainly very good reasons behind the potential tie up, combining DSV’s strength in Europe with UTi’s operations in fast growing Asia, Africa and North America. Even though it looks like the deal won’t go ahead, DSV’s plans to expand acquisitively must be seen in the context of a transforming economy.

The reasons behind these changes are examined in Ti’s latest report (published 16th December 2014). Here are ten key reasons why the logistics industry in 2015 will be characterised by increased acquisition activity:

  1. The global economy (particularly Europe) is forecast to improve, providing companies with more confidence to invest in new markets and sectors.
  2. Supply chains are reaching into untapped markets in the developing world, increasing the need for global logistics companies to support their multi-national clients.
  3. The reverse is also happening. Asian logistics companies are looking to expand their networks into Europe and North America to support the expansion of their customers.
  4. The express parcels sector is being propelled by e-commerce activity and this has made providers of last mile delivery, e-fulfilment and specialised IT solutions in demand.
  5. The emergence of a powerful middle class in Asia and Latin America (Africa to a lesser degree) has created more demand for higher value consumer goods, which in turn require a higher level of sophistication of supply chain management.
  6. Manufacturers and retailers are increasingly demanding more sophisticated supply chain IT capabilities which they can obtain from purchasing niche technology providers (in the way that Amazon acquired robotics expert Kiva).
  7. Retailing structures are changing in Europe with the advance of discounters such as Lidl and Aldi. Major logistics companies must diversify in order to protect their revenues and margins.
  8. Increased near-sourcing will mean that logistics companies will have to develop their capabilities in low cost manufacturing locations such as Turkey and North Africa for Europe and Central America for the US and Canada.
  9. Logistics companies are increasingly looking to expand into niche sectors such as healthcare/pharmaceutical where they can leverage their value adding capabilities and networks.
  10. Major corporations and investment institutions such as private equity companies are sitting on large cash piles – M&A activity is one way in which they can achieve better returns for investors.

For more information or to register your interest in Ti’s latest Mergers & Acquisitions report please click here.