LOGISTICS & SUPPLY CHAIN MANAGEMENT
UK & Ireland M&A Update – Q3 2021
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High levels of deal activity set to continue as sector invests for growth
16
completed in Q3
deals
Increase in
cross border
activity to
of deals
25%
£974m
disclosed deal value
Aggregate
for further information please contact Jason Whitworth
Q3 2021 deal activity
ClICK HERE TO VIEW chart
In a month where the challenges facing the Logistics sector have never been more visible, we launched our latest UK Logistics Confidence Index 2021, a survey of over 100 leading decision makers across the industry. Read it here.
With a focus on growing revenues and operational margins it is no surprise to see that M&A remains high on the board room agenda with 42% of respondents, the highest level since the survey began in 2012, saying they were likely to make acquisitions over the next 12 months. Economies of scale and expansion of service offering are reported as the
main drivers behind this.
All of which is reflected in our review of Q3 deal activity, with volume up again following three consistently high quarters. We had direct involvement in two of the key recent deals outlined below, the sale of the fulfilment business, Cygnia, to Wincanton plc and the IPO of Microlise. We continue to see real opportunity for shareholders to grow value in the current market, whether in raising investment capital, de-risking, or seeking a full exit.
Other high-profile names were also active with Culina acquiring Eddie Stobart, and DPD group acquiring CitySprint. Institutional interest also continued as BGF invested in Speedy Freight. Trade continue to see significant benefit in consolidation, expansion of value added services, access to customers, and geographic expansion whilst investors recognise the growth opportunity in certain areas of the market.
When it comes to valuation, it is no surprise given the headlines and economic uncertainties as we entered peak trading that our BDO FTSE Logistics Index had its first quarterly decline since Q1 2020. However, this decline in listed company valuations is in sharp contrast to what we are seeing in M&A, where competition for quality assets and funding liquidity mean valuation levels remain high.
44%
private equity
investment
involved
48 deals were completed in 2020. Lower than 2019 levels, but this is a 10% increase from 2018, despite the uncertainties caused by the pandemic and Brexit.
Number of deals
Deal value (£m)
Q1
Q2
Q3
Q4
2015
Q1
Q2
Q3
Q4
2016
Q1
Q2
Q3
Q4
2017
Q1
Q2
Q3
Q4
2018
Q1
Q2
Q3
Q4
2019
Q1
Q2
Q3
2020
0
200
400
600
800
1000
1200
1400
1600
0
10
20
30
40
50
60
70
Volume
Value
annual deal activity
Year on year comparison
H1/Q2 2020 deal activity chart will appear here
Source: Capital IQ
BDO FTSE Logistics Index
FTSE All-Share Index
Number of vacancies
07/2019
08/2019
09/2019
10/2019
11/2019
12/2019
01/2020
02/2020
03/2020
06/2020
08/2020
10/2020
03/2021
-60%
-60%
-40%
-20%
0%
20%
40%
60%
%
0%
80%
Source: BDO Analysis
Number of deals
Deal value (£m)
Q1
Q2
Q3
Q4
2016
Q1
Q2
Q3
Q4
2017
Q1
Q2
Q3
Q4
2018
Q1
Q2
Q3
Q4
2019
Q1
Q2
Q4
2020
0
400
800
1200
1600
0
5
10
15
20
Volume
Disclosed value (£m)
DEAL VOLUME & VALUE 2016 - 2021 (Q3)
Q3
The Business Growth Fund ('BGF') invested in UK-based provider of B2B express freight services Speedy Freight.
Speedy Freight has experienced years of consistent growth, posting 39% growth in the last year alone following increased demand through Covid. It aims to continue its growth and the investment will help to accelerate the expansion plans.
PE have been interested in the sector for a number of
years. Recently, there have been a number of high profile transactions including Hermes acquisition by Advent International and investment in Ligentia by Equistone. This interest is great news for vendors as PE are paying strong multiples to deploy their cash in a competitive market.
BGF acquisition of Speedy Freight
Nidd Transport, a UK based freight forwarder and operator, was acquired by AIM-listed UK logistics provider, Xpediator plc, for a consideration of £4.6m.
The transaction will enhance Xpediator’s earnings, as Nidd’s western European focus provides immediate cross-selling opportunities, complementing Xpediator’s focus on central and eastern Europe, Italy and Germany.
Xpediator plc acquisition of Nidd Transport
Microlise, the provider of transport management software to fleet operators, has listed on AIM. Microlise’s software helps operators to improve efficiency, safety, and reduce emissions through reduced fuel use, reduced mileage, improved driver performance, elimination of paperwork and delivery of an enhanced customer experience.
Microlise raised gross proceeds of £61.2 million at a Placing Price of 135 pence per share. As at 28th October, the share price had risen 42% to 192p.
The trading EBITDA multiple of 30.0x demonstrates how highly the market values technology that is being used to streamline supply chains.
You can read more about the Microlise deal here.
Transaction Value Undisclosed
IPO of Microlise
Cygnia Logistics, a provider of e-commerce fulfilment services has been acquired by Wincanton plc who identified e-commerce as a key growth market and an area of strategic focus and investment. The acquisition follows the group's investment earlier in 2021 in its state-of-the-art, automated e-fulfilment facility in Northamptonshire. The deal value was disclosed as £23.9m.
This transaction follows similar investments in growing
e-fulfilment operators including Rhenus acquiring CML, Yusen acquiring ILG, ESL’s acquisition of iForce and LDC (Lloyds Bank’s PE arm) investing in James & James. These exemplify the large trade operators’ and PE investors’ appetite to acquire in the dynamic and growing sectors of the logistics industry. You can read more about the Cygnia deal here.
Transaction Value Undisclosed
Wincanton PLC acquisition
of Cygnia Logistics
Transaction Value Undisclosed
Dija, the UK-based convenience store delivery startup, has been acquired by GoPuff of GoBrands Inc, the US-based digital convenience retailer. GoPuff is a leading European delivery platform providing consumers daily essentials in minutes.
This deal is expected to accelerate Gopuff's international expansion by establishing an immediate presence in France and Spain and providing further densification in the UK.
Gopuff, with its c. 40 Micro-fulfilment centres, is a great example of the move to increasingly immediate delivery expectations of consumers and evidence of startups disrupting incumbents through the use of technology
to meet consumer demand.
Transaction Value Undisclosed
GoPuff acquisition of Dija
CitySprint is to be acquired by DPD which is already Europe’s largest parcel delivery network. Earlier this year press speculation valued the acquisition at £250m, but this is likely to be subject to review.
CitySprint has seen significant growth through continued demand for its services as businesses require more urgent and time critical same day deliveries.
This transaction will allow both parties to benefit from each other’s services and expertise, in particular DPD will look to offer same day delivery service to its customers. It will be interesting to see what this means for customers in a market already dominated by a small number of parcel delivery companies.
DPD acquisition of CitySprint
CLICK for
diagram
The BDO Logistics FTSE Index performance saw its first decline since Q1 of 2020, with a quarter on quarter decrease of 18%, against a 1.5% increase in the FTSE
All-Share Index. The headline grabbing issues of staff shortages (both driver and to a lesser extent warehouse) and fuel shortages / price increases are certainly playing a significant part in this. Despite a backdrop of strong financial performance from operators' announced results, investor sentiment as to future earnings has clearly been impacted by the news of supply chain disruption, economic uncertainties, and inflationary pressures surrounding the sector.
Tracking the index since July 2019, performance remains ahead of the wider market with an 81% increase, against the FTSE All-Share Index which is down 3% over the
same period.
BDO LOGISTICS FTSE INDEX VS FTSE ALL-SHARE INDEX JULY 19 – SEPTEMBER 21
4%
FTSE All Share Index
FTSE All Share Index
120%
BDO Logistics FTSE Index
BDO Logistics FTSE Index
H1/Q2 2020 deal activity
CLICK HERE TO VIEW chart
04/2020
07/2020
09/2020
11/2020
05/2020
JASON WHITWORTH
M&A PARTNER
+44 (0)7990 532 296
jason.whitworth@bdo.co.uk
VINOD PATEL
TS DIRECTOR
+44 (0)7800 682 482
vinod.patel@bdo.co.uk
HUSAIN LAHER M&A
+44 (0)7779 566 450 husain.laher@bdo.co.uk
TO DISCUSS ANY MATTERS ARISING FROM THIS UPDATE,
PLEASE CONTACT OUR SECTOR TEAM:
Released in November, the 2020 edition of the BDO & Barclays UK Logistics Confidence Index presents the results of our recent survey of the views and insights of 100 senior decision makers, to assess confidence and expectations, as well as the latest hot topics and longer term trends, in the UK logistics sector.
This year the Confidence Index has
fallen to its lowest level since the survey began in 2012, against a backdrop of
The BDO & Barclays UK Logistics Confidence Index
CLICK for full report
Logistics continues to be a strong and resilient sector, with an appetite to invest for the future - it is perhaps no surprise that the number of companies expecting to make acquisitions is close to our all-time high of 2017. The adoption of technology to address business challenges such as talent shortages has rapidly accelerated this year. Meanwhile, many businesses are continuing to invest in sustainability, with more than seven in ten putting funds into green-related projects over the next 12 months.
unprecedented domestic and global uncertainty created by the pandemic, in addition to ongoing concerns over the UK’s future relationship with the EU and the continuing skills shortages.
However, this masks the high degree of polarisation in the views of operators - more than a third of operators reported that the pandemic has had a positive impact on their company’s performance, despite the economic disruption.
BDO FTSE LOGISTICS INDEX vs FTSE ALL-SHARE INDEX JULY 19 – september 21
annual deal activity
CLICK HERE TO VIEW chart
LOGISTICS & SUPPLY CHAIN MANAGEMENT
UK & Ireland M&A Update – Q3 2020
9
completed in Q3
deals
percentage of q3
Deals which are
cross border
of deals
25
£1,452m
disclosed deal value
Aggregate
for further information please contact Jason Whitworth
Q3 2020 deal activity
CLICK HERE TO VIEW chart
UK LOGISTICS: A RE-EMERGING APPETITE FOR M&A
With the pandemic continuing to have a dramatic impact on our lives, and Brexit reaching the sharp end of the deal or no-deal decision-making, there is still a great deal of uncertainty in the economy, with performance being driven by the nature of the end-customer markets and the ability of businesses to adapt. E-commerce, food distribution into retail and international freight, particularly around PPE, are some of those markets that are continuing to see growth in demand against the backdrop of the further regional lockdown policies being implemented.
There remains a strong sense of caution across the market. However there are signs that trade buyers and investors are starting to see opportunities to generate value, and this is reflected in an increase in Q3 M&A activity. Although deal volume year to date, at 33 deals, is significantly down on the previous year’s 47 deals, there continues to be strong activity from key operators. Deal value in Q3 jumped off the scale due to the £900m acquisition by Advent International of the Hermes Parcelnet and Hermes Germany operations from Otto Group, and the £420m acquisition by Compania Logistica de Hidrocarburos CLH S.A. of fifteen storage terminals from Inter Terminals Limited. The larger deals reflect the appetite for market leadership and opportunity for operational performance benefits in scale.
Trade deals in the quarter made up two thirds of the deals, with PE both in the UK and US continuing to show interest in the UK market. The high level of available “investment ready” funds across private equity means investors are actively engaged searching out both niche and disruptive growth opportunities.
Having experience of previous downturns, I cannot avoid being apprehensive as the economic impact of the pandemic continues to unfold. However, I continue to be impressed by the way operators are proving to be exceptionally robust and resilient as they adapt, with a number delivering strong growth. Based on the conversations we are having in the market, companies continue to show appetite to make acquisitions in the forthcoming months to support the changing demands of the economic landscape, and the opportunities and challenges it presents.
JASON WHITWORTH
M&A PARTNER
+44 (0)7990 532 296
jason.whitworth@bdo.co.uk
DOMINIC CAUNT
M&A
+44 (0)7813 631 668
dominic.caunt@bdo.co.uk
The Logistics Confidence Index 2021- Confidence bounces back as the sector looks to the future
Behind the headlines, why has there been a dramatic rise in sector positivity?
of deals in q3 are
border
cross
25%
of deals
of q3 deals
Q1
Q2
Q3
2021
Connect Group plc, a UK based distributor, has disposed of The Big Green Parcel Holding Company Limited and its subsidiaries including Tuffnells, to a SPV backed by UK-based restructuring advisory firm, Broad Oak Support Services.
The sale was considered to maximise shareholder value and allows Connect Group to focus on its core strengths of newspaper and magazine distribution, while meeting immediate cash requirements.
Aggregate Consideration: £15m
Big green parcel holding comp / Tuffnells Parcels Express Limited
NRG Fleet Services, a UK based provider of fleet management services, was sold to private equity house, Palatine.
The transaction supports both organic and acquisitive growth of NRG, which Palatine will utilise as a buy & build platform, developing NRG’s services and market position.
Transaction value: undisclosed
Palatine Private Equity’s acquisition of NRG Fleet Services Ltd
NRG Fleet Services, a UK based provider of fleet management services, was sold to private equity house, Palatine
The transaction supports both organic and acquisitive growth of NRG, which Palatine will utilise as a buy & build platform, developing NRG’s services and market position.
Transaction value: undisclosed
Palatine Private Equity’s acquisition of NRG Fleet Services Ltd
Fortec Distribution Network Limited, a UK based provider of palletised freight distribution services, was sold to For-ex Distribution Network, a subsidiary in the Pall-Ex group.
Post deal, Fortec will continue to operate as a separate pallet network in the UK, as a part of the overall Pall-Ex group of companies.
This is the second purchase by Pall-Ex Group, following its MBO in November 2019, strengthening its position in the UK.
Enterprise value: undisclosed
Sale of Fortec Distribution Network to For-ex Distribution Network
The Otto group has disposed of a significant portion of Hermes Parcelnet (75% stake) and Hermes Germany (including its group companies; 25% stake).
Hermes, a provider of package delivery services specialising in B2C and C2C segments, expanded to the UK in 2000, reporting £73m EBITDA.
The acquisition by Advent International, a US private equity firm, will enable Hermes to benefit from its resources and expertise, achieving further growth and development.
Transaction value £903m
Advent International’s acquisition of Hermes Parcelnet and Hermes Germany
100%
01/2021
Key themes from the quarter:
The BDO Logistics FTSE Index performance saw its first decline since Q1 of 2020, with a quarter on quarter decrease of 18%, against a 1.5% increase in the FTSE All-Share Index. The headline grabbing issues of staff shortages (both driver and to a lesser extent warehouse) and fuel shortages / price increases are certainly playing a significant part in this. Despite a backdrop of strong financial performance from operators' announced results, investor sentiment as to future earnings has clearly been impacted by the news of supply chain disruption, economic uncertainties, and inflationary pressures surrounding the sector.
Tracking the index since July 2019, performance remains ahead of the wider market with an 81% increase, against the FTSE All-Share Index which is down 3% over the same period.
Key themes from the quarter:
Some operators are reporting that increased customs processing and reduced air freight capacity have impacted international volumes.
Royal Mail Group follow, with a 177% increase since July 19, and a 19% Q2 increase.
In May 2021, FY21 results reported a 116% increase in operating profit against FY20 following significant margin improvements in its focus countries (Spain, France and the US).
In March 2021, the directors reported its growth expectations of 12% revenue CAGR to 2025, and doubling of its operating profit, generating €1bn of free cash flow.
05/2021
07/2021
120%
140%
LDC backed SMH Fleet Solutions is a UK-based provider of vehicle management and logistics solutions to the motor industry. It has been acquired by Cazoo, the online car retailer founded just three years ago, which launched its platform in December 2019 before listing in New York a year later. The reported value for SMH was £70m.
The deal represents a significant premium for the business at >2x revenue and against a negative EBITDA position at December 2020. This shows the strategic significance of bringing SMH’s expertise in vehicle management, logistics, inspections, refurbishments and storage needs into the Cazoo group.
Cazoo acquisition of SMH Fleet Solutions
Advanced Supply Chain ('ASCG'), Yorkshire based provider of logistic services, has been acquired by Reconomy, the waste management and circular resource management specialists.
The deal will allow ASCG and Reconomy to provide unrivalled technology-enabled global support for leading retail brands seeking to manage their environmental impact.
ASCG received a lot of interest while in process given its extensive range of value adding services. Ultimately, Reconomy saw the greatest value in adding ASCG’s services to its ‘sustainable and circular economy' services.
Reconomy acquisition of
Advanced Supply Chain group
In September 2021, Xpediator’s interim half year results announced
a 37% increase in revenue, and 71% increase in Adj. PBT against FY20. Again, despite positive financials, the share
price fell.
Royal Mail Group saw its share price falling 27% in the quarter despite posting revenue growth of 8.2%, with an overall increase since July 19
of 101%.
Operators continue to assert growth through acquisition to be a key strategic pillar for continuing growth.
09/2021
Read the results of our survey of the views and insights of 100 senior decision makers, to assess confidence and expectations, as well as the latest hot topics and longer term trends, in the UK logistics sector.
BDO LOGISTICS
Our clients receive high quality, integrated advice and support resulting in bespoke solutions to help them achieve their objectives. Our approach is always partner-led and our partners are driven by finding the ideas and insights that will make a difference to your business. We are proud of our track record in this sector and passionate about contributing to your success.
With details of our teams and service line offerings, and of our wide deal experience, client contacts and networks in the sector, find out more about how we can help you.
DOMINIC CAUNT
M&A
+44 (0)7813 631 668
dominic.caunt@bdo.co.uk
The headline is that confidence is up, with the Index rising to 62.5, its highest level since 2015. The dramatic rise in sector positivity might seem counterintuitive set against current headlines around supply chain issues, however the feedback suggests a large number of operators across the sector have more certainty and visibility as to the challenges and the opportunities the market is presenting, and hence a higher level of confidence around their ability to invest and grow profit over the next year.
In a month where the challenges facing the Logistics sector have never been more visible, we launched our latest UK Logistics Confidence Index 2021. Read it here.
A survey of the over 100 leading decision makers across the industry. The headline is that confidence is up, with the Index rising to 62.5, its highest level since 2015.
The dramatic rise in sector positivity might seem counterintuitive with the extremely challenging backdrop but after a low point last year, the feedback suggests a large number of operators across the sector have more certainty and visibility as to the challenges and the opportunities the market is presenting, and hence a higher level of confidence around their ability to invest and grow profit over the next year.
16
completed in Q3
deals
Increase in
cross border
activity to
of deals
25%
investment
private equity
involved
of q3 deals
44%
of deals in q3 are
border
cross
of deals
25%
£974m
disclosed deal value
Aggregate
Cygnia Logistics, a provider of eCommerce fulfilment services has been acquired by Wincanton plc who identified eCommerce as a key growth market and an area of strategic focus and investment. The acquisition follows the Group's investment earlier in 2021 in its state-of-the-art, automated e-fulfilment facility in Northamptonshire. The deal value was disclosed as £23.9m.
This transaction follows similar investments in growing e-fulfilment operators including Rhenus acquiring CML, Yusen acquiring ILG, ESL acquisition of iForce and LDC (Lloyds bank’s PE arm) investing in James & James. These exemplify the large trade operators and PE investors appetite to acquire in the dynamic and growing sectors of the logistics industry. You can read more about the Cygnia deal here.
Transaction Value Undisclosed
Wincanton PLC acquisition
of Cygnia Logistics
Microlise, the provider of transport management software to fleet operators, has listed on the AIM. Microlise’s software helps operators to improve efficiency, safety, and reduce emissions through reduced fuel use, reduced mileage, improved driver performance, elimination of paperwork and delivery of an enhanced customer experience.
Microlise raised gross proceeds of £61.2 million at a Placing Price of 135 pence per share. As at 28th October, the share price had risen 42% to 192p.
The trading EBITDA multiple of 30.0x exemplifies how highly the market values technology that is being used to streamline supply chains.
Transaction Value Undisclosed
IPO of Microlise
Dija, the UK-based convenience store delivery startup, has been acquired by GoPuff of GoBrands Inc, the US-based digital convenience retailer. GoPuff is a leading European delivery platform providing consumers daily essentials in minutes.
This deal is expected to accelerate Gopuff's international expansion by establishing an immediate presence in France and Spain and providing further densification in the UK.
Gopuff, with its c. 40 Micro-fulfilment centres, is a great example of the move to increasingly immediate delivery expectations of consumers and evidence of startups disrupting incumbents through the use of technology to meet consumer demand.
GoPuff acquisition of Dija
(Undisclosed)
CitySprint is to be acquired by DPD which is already Europe’s largest parcel delivery network. Earlier this year press speculated the value of the acquisition at £250m, but I suspect this is subject to review.
CitySprint has seen significant growth through continued demand for its services as businesses require more urgent and time critical same day deliveries.
This transaction will allow both parties to benefit from each other’s services and expertise, in particular DPD will look to offer same day delivery service to its customers. It will be interesting to see what this means for customers in a market already dominated by a small number of parcel delivery companies.
DPD acquisition of CitySprint
Royal Mail Group saw its share price falling 27% in the quarter despite posting revenue growth of 8.2%, with an overall increase since July 19
of 101%.
In September 2021, Xpediator’s interim half year results announced
a 37% increase in revenue, and 71% increase in Adj. PBT against FY20. Again, despite positive financials, the share
price fell.
Some operators are reporting that increased customs processing and reduced air freight capacity have impacted international volumes.
Operators continue to assert growth through acquisition to be a key strategic pillar for continuing growth.
TO DISCUSS ANY MATTERS ARISING FROM THIS UPDATE, PLEASE CONTACT OUR SECTOR TEAM:
CLICK for
diagram
H1/Q2 2020 deal activity
CLICK HERE TO VIEW chart
VINOD PATEL
TS DIRECTOR
+44 (0)7800 682 482
vinod.patel@bdo.co.uk
Source: BDO Analysis
Number of deals
Deal value (£m)
Q1
Q2
Q3
Q4
2016
Q1
Q2
Q3
Q4
2017
Q1
Q2
Q3
Q4
2018
Q1
Q2
Q3
Q4
2019
Q1
Q2
Q3
Q4
2020
Q1
Q2
Q3
2021
0
400
800
1200
1600
0
5
10
15
20
Volume
Disclosed value (£m)
DEAL VOLUME & VALUE 2016 - 2021 (Q3)
Source: Capital IQ
BDO FTSE Logistics Index
FTSE All-Share Index
07/2019
09/2019
11/2019
01/2020
03/2020
05/2020
07/2020
09/2020
11/2020
03/2021
-60%
-40%
-20%
0%
20%
40%
60%
80%
BDO FTSE LOGISTICS INDEX vs FTSE ALL-SHARE INDEX JULY 19 – JUNE 21
Download a printable version here