Logistics operators seek mergers and acquisitions - report

Around half of businesses in the logistics industry are looking to make acquisitions over the next 12 months despite challenges facing the sector, new research reveals.

According to the 2022 Barclays-BDO Logistics Confidence Index, logistics industry confidence has dropped 12 points over the past year due to increased costs, economic pressures and concern over talent shortages.

However, almost half of logistics operators say they are likely to make an acquisition in the coming year as they look to expand operations and become more competitive.

A small majority is confident about weathering high inflation, rising fuel and energy costs and labour shortages.

Three out of five (60 per cent) are expecting turnover to increase over this time frame, with only a quarter (25 per cent) anticipating a decrease.

Despite the challenges facing the sector, three out of five businesses expect their turnover to increase in the coming year.

Mergers and acquisitions continue to be a strategic priority for logistics companies with 45 per cent of respondents reporting that they are likely to make an acquisition in the next 12 months, the highest figure ever recorded in this survey 's 10-year history.

Operators are seeking to achieve economies of scale and expand their service offering, ingraining a trend for consolidation into what remains a fragmented industry.

On the flipside, however, high inflation and rising costs are impacting levels of profitability, as just under half (45 per cent) of logistics companies say their margins will improve in the next 12 months, compared to 62 per cent this time last year. Meanwhile, almost a third (30 per cent) are anticipating a drop in profitability, up by 11 per cent on 2021.

Of all the challenges facing the industry, 80 per cent say labour shortages will have a major impact on their business in the coming months. In fact, concerns over a dearth of workers have led nine in ten firms to improve pay and conditions for their workforce. The most sought-after roles are drivers and warehouse staff, followed by office and admin staff.

Lee Collinson, head of manufacturing, transport & logistics at Barclays Corporate Banking, said: “Understandably, the circumstances of the past year have led to a drop in logistics sector confidence. Price rises, supply chain challenges, a scramble for talent, and strikes at UK and European ports have taken their toll.

“However, it 's encouraging to see that businesses are looking ahead at capex and finding ways to grow. Many are looking to invest in mergers and acquisitions, as well as ESG initiatives and staff welfare programmes to remain competitive. ”

Jason Whitworth (pictured), Partner, M&A advisory and logistics & supply chain management at BDO LLP, said: “In the last 10 years [since the launch of the Logistics Confidence Index], the sector has changed immensely, accommodating the rise in ecommerce, a seismic shift in customer expectations, the ESG agenda, and the growing role technology is playing in every aspect of the industry.

“Our latest report demonstrates that those decade-defining themes are still very much in play, now taking on greater meaning in the face of significant challenges, led by rocketing fuel and energy costs, customer pricing pressures, and a faltering economy. ”