Private equity could win big as it preps European logistics exits

The need for timely and sustainable delivery is buoying demand for everything from logistics outsourcing to drone drop-off services

The transportation and logistics sectors have been major beneficiaries of the supply chain disruptions that swept the globe since the rapid onset of the pandemic. Demand for the timely, reliable delivery of goods has never been higher and this has made companies offering these services prime targets for private equity (PE).

Unlike most sectors, transportation saw solid performance in 2022. Globally, PE-backed transportation deals accounted for US$84.7 billion of deal value last year, virtually matching 2021's US$84.2 billion.

Across Western Europe, these deals accounted for US$53.4 billion of PE deal value, up from just US$3.7 billion year-on-year thanks to Blackstone and Edizione's goliath US$46.4 billion acquisition of Italian motorways and airport group Atlantia. Volume was also up, by 16% year-on-year, to 58 buyouts in the region.

Exit pipelines

Difficulties around obtaining cargo space and freight rate movements are among the inherent challenges encouraging companies to look for specialist partners, spurring outsourcing demand. This is an opportunity for PE to acquire growing companies—and to exit their existing logistics assets into a market benefiting from strong tailwinds.

Several notable deals could soon be coming up—of the top-20 sponsor-backed companies in the European transportation sector that Dealogic believes most likely to exit, seven sit in logistics.

At the front of the queue is French B2B2C logistics operator Staci. Ardian became the company’s fourth PE owner in 2019 after acquiring it from Belgian sponsor Cobepa. The company provides an end-to-end service for companies wishing to outsource their warehousing, merchandising material and print marketing. Dealogic predicts a sale kick off in 2023, with Ardian looking for approximately 15x EBITDA.

Next up on Dealogic’s list is another French player: Groupe Sterne. As companies and their customers increasingly focus on sustainability, businesses are seeking third parties that live up to their own high standards. This is an additional growth accelerant for green logistics operators such as Sterne. The business, acquired by Tikehau Capital's T2 Energy Transition fund in November 2021, has invested heavily into route and loading rate optimization to improve sustainability. It has also been scaling. The bolt-on of German competitor Nox NachtExpress just three months after Tikehau's investment brought operations to more than 80 warehouses in France, Germany, Austria, Belgium and the Netherlands.

Ligentia, a UK operator owned by Equistone Partners Europe, is another potential candidate. The PE firm bought the company in February 2021 and has since focused on expansion. In October 2022, Ligentia acquired VGL Solid Group, bringing total revenue to £1 billion and strengthening its Asia-Europe and Transpacific trade lanes. Notably, the business focuses on data analytics and journey reporting to optimize supply chains and minimize carbon emissions. It is currently seeking targets across various verticals in the US and Central Europe.

Incubation period

Venture capital firms have also gotten in on the action, with a focus on delivery and last-mile services. However, these are expected to have some way to go before they are ready for exit. Swedish parcel locker group Instabox is a likely candidate for an exit, according to Dealogic. The company received US$190 million in April 2022 in a Series C funding round led by Verdane with participation from EQT Ventures, Creades, M2 Asset Management, Tham Special Investment, Nineyards and Tacito, giving the startup unicorn status. In November, the company discontinued its operations in the Netherlands, having filed for bankruptcy for its entities Instabox Netherlands and Red je Pakketje and their subsidiaries.

Some ways behind on the list of potential exits is Manna Aero—the Irish drone delivery service raised US$25 million in Series A funding in April 2021, led by Draper Esprit alongside DST Global Partners and Team Europe, the VC fund of Lukasz Gawoski, founder of German take-out app Delivery Hero. Manna charges retailers a fixed fee for the service, which can carry items up to a weight of 2kg and has undergone trials in the Irish town of Oranmore. The startup plans to enter continental Europe and the US and has hired Andrew Patton, a former executive of Alphabet's drone arm, Wing, to lead this stateside expansion.

The global drone package delivery market is currently small but is ready for take-off. By one estimate it could total US$32.1 billion by 2031 after growing at a compound annual growth rate of more than 43%, elevated by rising demand for timely and sustainable delivery. When the time is right for exit, Manna has the potential to deliver handsome returns for its early backers.

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