Driving profits: Transport PE hits record high in Q3

Buyout firms bank on rising demand for same-day delivery and technological innovation to drive future returns

A shift in consumer demand is causing buyout firms to turn their attention to the transport and logistics industry. Private equity (PE) investment in the global transportation sector climbed to its highest quarterly value on record in the third quarter, with firms investing US$21.35 billion across 23 deals over the period.

Headline figures were pushed up by the US$15.9 billion acquisition of warehouse operator Global Logistics Partners (GLP) by a Chinese consortium including Vanke, Hillhouse Capital and Hopu Investment Management. The deal is the largest Asian buyout on record and the second largest transport and logistics buyout after Ferrovial’s takeover of BAA in 2006.

GLP was a sought-after asset, with a Warbug Pincus-led consortium understood to have also run hard at the deal. This reflects strong appetite across the buyout community for transport and logistics targets.

Interest has been predominantly driven by the race among retailers, grocers and food companies to provide customers with a same-day delivery service. Earlier this year, Tesco became the first British retailer to offer this service across the whole of the UK. Meanwhile in the US, Amazon’s recent high profile acquisition of Whole Foods is expected to further accelerate the uptake of same-day delivery services.

According to McKinsey, the parcel market in the US alone is expected to more than double size between 2016 and 2025, with same-day delivery accounting for a fifth of demand. Rapidly developing delivery technologies, including autonomous ground vehicles and digital demand aggregation platforms, have opened up new growth opportunities. PE firms will move quickly to capitalize on such assets, signalling healthy deal activity in the near future.

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