Supply chains are the lifeblood of global trade and industry, yet recent years have seen them disrupted by a multitude of challenges. Ongoing geopolitical tensions, a global pandemic, trade wars, rising prices and increasing protectionism have all contributed to severe supply bottlenecks, impacting the smooth flow of goods to market.
In response, M&A has emerged as a vital tool for businesses seeking to boost supply chain performance. By consolidating skills and capabilities closer to home or by integrating new technologies to streamline operations and reduce costs, companies aim to restore and strengthen their supply networks.
M&A and deals
Ongoing disruptions are prompting businesses and investors to focus 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—is on the rise as both companies and sponsors seek to alleviate bottlenecks and enhance business performance.
In 2024, a total of 116 deals valued at US$9 billion took place in the logistics and warehousing space—marking a 32 percent increase in value year on year. Deal volume also rose by 12 percent, indicating a steady upturn in market activity.
While these figures are a strong bellwether for the market, the actual volume and value of supply chain-related deals are likely much higher as companies bolster their supply across various sectors.
The largest logistics and warehousing deal of 2024 saw Belgian mail and logistics company bPost acquire the France-based global logistics specialist Staci for the sum of US$1.4 billion. Previously owned by French PE firms Ardian France and Société Générale Capital Partenaires, Staci’s network of 79 logistics hubs spans more than 900,000 square meters of warehouse space. The acquisition highlights bPost’s transition from a traditional postal operator to a flexible third-party logistics provider.
Opportunities in the market
Consolidation, nearshoring, digitalization and disruption are major trends driving opportunities in supply chain M&A.
The logistics sector remains highly fragmented across various jurisdictions, creating fertile ground for M&A opportunities. Brazil’s logistics sector, in particular, stands out due to its fragmented nature, with the top ten players accounting for less than three percent of total market share. This trend will continue to deliver a steady flow of M&A deals over the coming months and years.
Bringing it back home
Nearshoring—the outsourcing of business processes to a nearby country, often with shared borders—is another trend set to boost supply chain M&A. Ongoing geopolitical tensions across the globe, particularly between US and China, have boosted the popularity of nearshoring, as businesses seek to relocate supply chains to safer and less expensive territories. According to an NTT Data survey, 68 percent of shippers believe supply chains require rebalancing toward a more local and regional approach.
Mexico, in particular, had looked primed to benefit from this trend. In 2023 it overtook China to become the US’s largest trading partner, and President Donald Trump’s promised tariffs on imported Chinese goods looked set to further strengthen Mexico’s economic ties with the US and increase M&A activity.
However, much will now depend on the 25 percent duty Trump has threatened to impose on goods from Mexico and his expected effort to renegotiate the US-Mexico-Canada Agreement (USMCA), which could make it more difficult for goods made in Mexico to enter the US duty free. The Trump administration’s goal is to reduce the use of inputs from outside the USMCA region, in particular from China. The uncertainty surrounding this, and any new rules that emerge, could offset any benefits to relocating production to Mexico.
Digital disruption
Digitalization, including the disruptive power of artificial intelligence, is another key driver of deals as businesses leverage new solutions to create efficiencies and cost savings across their supply chain. The global digital logistics industry is tipped for rapid growth, from an estimated value of around US$22 billion in 2024 to reach more than US$81 billion by 2029, according to Research and Markets.
There is now an expectation placed on logistics companies to deliver performance indicators, data and tracking to their clients. This growing demand looks set to generate a wave of dealmaking as traditional logistics firms race to boost their digital capabilities. 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.
Challenges in the market
The rise in supply chain-related dealmaking will not be without its challenges. Increased regulatory scrutiny and mounting environmental, social and governance (ESG) concerns create new layers of complexity but can also present opportunities for growth and innovation.
In Europe, the pending implementation of the EU Corporate Sustainability Due Diligence Directive (known as CSDDD) is placing pressure on businesses to conduct due diligence across their supply chains. This heightened focus on the impact of businesses on people and the environment, in particular with suppliers and subcontractors, will require a different approach from dealmakers to focus on more transparent and resilient supply chains. The European Commission is currently reviewing the CSDDD and related laws with the aim to simplify sustainability-related reporting obligations.
New laws and regulations related to sustainability, from deforestation laws to forced labor trade prohibitions, are also placing pressure on buyers to conduct extensive due diligence. By being well-prepared for the due diligence process, buyers can identify and mitigate risks early, ensuring smoother transactions and fostering trust with stakeholders. This proactive approach not only helps in complying with regulations but also positions companies as well-managed and forward-thinking businesses, attracting more investment and business opportunities. However, the increased onus on buyers could catch them by surprise if they are not adequately prepared for the due diligence process, potentially derailing a prospective deal.
Outlook
In an increasingly fragmented and complex geopolitical landscape, the need to safeguard supply chains is becoming more urgent. M&A has emerged as a vital tool for businesses and investors to seek out new solutions to age-old problems, building durable supply chains that can withstand external threats.
New technological advancements, particularly in logistics and warehousing, offer exciting opportunities for businesses to stay ahead. The growing trend of nearshoring is likely to push up valuations in desirable locations, increasing competition and driving M&A activity in the coming months and years.
While challenges remain, particularly with increased regulatory burden and mounting environmental and social concerns, those who are adequately prepared will be well-positioned to weather the storm and capitalize on long-term opportunities.