Transaction volumes in the UK logistics industry have fallen by 50 per cent in the second quarter of 2020, according to the latest report from national accountancy and business advisory firm BDO LLP.
The ‘UK Logistics: Building Resistance’ report revealed that eight deals were completed from April to the end of June 2020 (16 in Q1 2020), with the overall half-year figure also down by a third compared to H1 2019. Disclosed values for deals in Q2 sat at £131 million, £79 million lower than the value recorded between January and March 2020.
Despite the sharp fall in transaction volume, there were a number of interesting deals in Q2, including the £98 million acquisition of Fowler Welch by Culina, with the acquisition of Return Loads by Mandata and Connexus by Addesecure underpinning the core drivers for M&A activity – a continued appetite for innovative technology and synergies through consolidation. Interestingly, both of these last two transactions involved private equity investors, demonstrating a steadfast desire to invest available capital to support portfolio assets or in new quality growth platforms.
The report also highlighted that the BDO Logistics FTSE Index and the FTSE All Share Index have both rallied at the end of July 2020, recovering to 17 per cent and 19 per cent, respectively, against levels 12 months ago.
Jason Whitworth, M&A partner at BDO LLP, explained: “The BDO Logistics FTSE Index fell by over 40 per cent in March this year, reflecting the global level of disruption to trade routes and the direct impact of this on the sector.
“The impact of lockdown was significant for many, whilst some, specifically those servicing the accelerated shift to ecommerce and the online move in food retail, have benefitted. As businesses reacted to the pandemic and focussed on their own operational challenges, it is no surprise to see that Q2 saw a significant fall off in M&A activity.
“Looking forward, businesses will need to understand and adapt to the longer-term economic and operational impacts. Change creates opportunity and, as such, I anticipate further consolidation in the market as the financial pressures of lockdown hit home later in the year and those who maintain a strong capital base look to grow.”