Recent years have presented a series of unprecedented challenges to global supply chains, the critical arteries of world trade and industry. From geopolitical tensions and trade wars to a global pandemic, rising prices, and an increasing wave of protectionism, the smooth flow of goods to markets has encountered severe bottlenecks. In response, mergers and acquisitions (M&A) have emerged as a vital tool for businesses to enhance their supply chain performance. By consolidating skills and capabilities closer to home or integrating new technologies, companies aim to restore and fortify their supply networks.
M&A and Deals
Ongoing disruptions have sharpened the focus of businesses and investors on supply chain-related dealmaking. M&A activity within the logistics and warehousing sector—a strong indicator of overall supply chain-related deal volume and value—has seen a notable rise. In 2024, the sector witnessed 116 deals valued at $9 billion, marking a 32% increase in value compared to the previous year. Deal volume also rose by 12%, signifying a consistent uptick in market activity. These figures underscore how significantly the logistic and warehousing sectors have attracted investor interest as companies seek to mitigate logistical challenges.
Despite these promising figures, the true volume and value of supply chain-related deals are likely even higher as companies work to bolster their supply chains across various sectors. A notable example is the largest logistics and warehousing deal in 2024, where Belgian mail and logistics company bPost acquired France-based global logistics specialist Staci for $1.4 billion. Previously owned by French private equity firms Ardian France and Société Générale Capital Partenaires, Staci’s network spans 79 logistics hubs with over 900,000 square meters of warehouse space. This acquisition clearly signals bPost’s strategic shift from a traditional postal operator to a versatile third-party logistics provider, illustrating the adaptive strategies businesses are deploying in response to supply chain disruptions.
Opportunities in the Market
Several key trends are propelling opportunities in supply chain M&consolidation, nearshoring, digitalization, and disruption. The logistics sector remains highly fragmented across various jurisdictions, presenting a fertile ground for M&A opportunities. Brazil’s logistics sector stands out due to its fragmentation, with the top ten players holding less than 3% of the total market share. This fragmentation is expected to sustain a steady flow of M&A deals over the coming months and years, offering vast potential for consolidation and growth. Companies, therefore, have substantial opportunities for establishing stronger market positions by leveraging M&A to achieve scale and operational efficiencies.
Nearshoring, the outsourcing of business processes to nearby countries, is another trend poised to boost supply chain M&A. Geopolitical tensions, particularly between the US and China, have heightened the appeal of nearshoring. Businesses are increasingly eager to relocate supply chains to safer and more cost-effective territories. According to an NTT Data survey, 68% of shippers believe supply chains need rebalancing toward a more local and regional approach. Mexico emerges as a prime beneficiary of this trend. In 2023, it overtook China to become the US’s largest trading partner. Promised tariffs on imported Chinese goods by President Donald Trump further strengthened Mexico’s economic ties with the US and ramped up M&A activity, even though potential changes in trade policies keep enterprises on their toes.
Digital Disruption
Digitalization, particularly through the disruptive power of artificial intelligence, serves as another key driver of deals. Businesses are leveraging new technologies to enhance efficiencies and reduce costs across their supply chains. The global digital logistics industry is set for rapid growth, with an estimate of around $22 billion in 2024 expected to surge to more than $81 billion by 2029, according to Research and Markets. The increased reliance on digital solutions has prompted logistics companies to incorporate performance indicators, data tracking, and information transparency to meet client demands. This trend underscores the imperative for the logistics sector to adopt digital technologies for maintaining competitiveness and service excellence.
Logistics companies are now expected to provide performance indicators, data, and tracking information to their clients. This growing demand is likely to trigger a wave of dealmaking as traditional logistics firms strive to bolster their digital capabilities. For instance, in February last year, US-based supply chain solutions provider Blue Yonder acquired German software company flexis AG, which specializes in production optimization and transportation planning. By integrating these advanced technologies, logistics firms can offer enhanced services and operational efficiencies, addressing the contemporary demands for more secure and transparent supply chains.
Challenges in the Market
Navigating this surge in supply chain-related dealmaking comes with hurdles. Increased regulatory scrutiny and rising environmental, social, and governance (ESG) concerns introduce new layers of complexity but also open avenues for growth and innovation. European businesses are particularly affected by the forthcoming implementation of the EU Corporate Sustainability Due Diligence Directive (CSDDD). This directive imposes pressure on businesses to conduct extensive due diligence across their supply chains. An intensified focus on the impact of businesses on people and the environment, especially regarding suppliers and subcontractors, necessitates a revised approach from dealmakers. They now need to prioritize more transparent and resilient supply chains to navigate the regulatory landscape effectively.
New regulations linked to sustainability, such as deforestation laws and forced labor trade prohibitions, also press buyers to conduct thorough due diligence. Adequate preparation for this process allows buyers to identify and mitigate risks early, ensuring smoother transactions and fostering trust with stakeholders. This forward-thinking approach not only facilitates compliance with regulations but also positions companies favorably, attracting more investment and opportunities. However, an unprepared buyer might be caught off guard by the rigorous due diligence requirements, potentially derailing a prospective deal. Companies that adopt proactive measures in identifying and addressing potential regulatory challenges will position themselves for long-term success and regulatory compliance.
Outlook
In recent years, global supply chains, the essential lifelines of international trade and industry, have faced a series of unprecedented challenges. Geopolitical tensions, trade wars, the global pandemic, rising costs, and an increasing wave of protectionism have all caused severe disruptions in the smooth flow of goods to various markets. As a result, businesses have turned to mergers and acquisitions (M&A) as a critical strategy to improve supply chain performance. Through M&A, companies can consolidate skills and capabilities closer to their home bases or integrate new technologies, aiming to strengthen and stabilize their supply networks. By aligning resources and expertise more effectively, businesses hope to overcome the bottlenecks and complexities that have plagued their operations. These strategic moves are essential as companies strive to adapt to rapidly changing market dynamics and ensure resilience in their supply chains amid ongoing uncertainties.
