📊 M&A market begins to accelerate

Irbis Index October 2023

To view the full Index for October 2023 click here.

Irbis Capital

Mergers and Acquisition: The Power of Aggregator Strategy Mergers and acquisitions are key strategies for companies to expand and strengthen their market presence. The M&A aggregator strategy involves combining multiple companies into a larger entity to create a business that is stronger and more valuable than the sum of its individual components.

• Benefits of the aggregator strategy include increased market share and negotiating power, cost efficiencies and operational synergies, enhanced innovation and service offerings, risk diversification, and improved competitive positioning.

• Challenges in aggregator M&A include integrating multiple companies, managing cultural clashes, aligning operations, addressing redundancies, and maintaining quality and service.

Effective management of these challenges requires clear communication, strong leadership, and an understanding of the operational and cultural dynamics of each acquired company. (link)

News

Mergers and Acquisitions market begins to accelerate In the transportation and logistics sector, M&A is experiencing a resurgence after a challenging period. High-interest rates, low freight volumes, and inflation had previously suppressed M&A activity. However, stability is returning, prompting a market rebound. Spencer Tenney of Tenney Group noted that the market is adjusting to a new normal with more predictable conditions, leading to increased deal conversations. Jonathan Britva of Republic Partners observed that the market has been more predictable recently, a positive sign for 2024. Challenges like high inflation and interest rate hikes had previously created uncertainty, affecting deal structuring and valuation. However, the credit market, which was largely closed for most of the year, began to open up in the third quarter, signaling a potential increase in M&A activity. (link)

Ontario Teachers’ fund backs Indian logistics unicorn Xpressbees in $80M funding Indian logistics firm Xpressbees has raised $80M in a funding round led by Ontario Teachers' late-stage venture growth fund. This investment values the company at $1.4B. Xpressbees works with over 1,000 clients, including Paytm, Meesho, and Xiaomi, to deliver their products across India. The company processes more than 2.5M orders daily and operates in over 2,000 cities and towns. With this funding round, Xpressbees' total funding reaches approximately $680M. The Canadian pension fund's investment suggests that Xpressbees is preparing for an initial public offering within the next year. (link)

US invests $553M into development of Adani-backed container terminal at Port of Colombo The US Development Finance Corporation (DFC) has committed $553M to the development of a deep-water container terminal at the Port of Colombo, operated by Adani Ports and Special Economic Zone (APSEZ). This investment aligns with Sri Lanka's efforts to diversify its partnerships and reduce Chinese influence. In 2021, APSEZ entered a 35-year contract to develop the West Container Terminal with John Keells Holdings and the Sri Lanka Ports Authority. The US funding is seen as a strong endorsement of the Adani Group, despite recent corruption allegations against the company. (link)

UPS Completes Acquisition of MNX Global Logistics UPS has officially completed its acquisition of MNX Global Logistics, a key provider in time-critical logistics. This significant move, finalized on November 2, 2023, after receiving all necessary regulatory approvals, is set to expand UPS's capabilities in time-sensitive logistics services. The acquisition is particularly strategic for enhancing UPS's offerings to healthcare customers across the United States, Europe, and Asia. (link)

DPD opens an eco-sortation centre DPD, a parcel delivery company, has opened a new eco-regional sortation center in Bromley-By-Bow, East London. The facility, valued at £40M, will enable DPD to deliver up to 80,000 "green" parcels daily in London. The site, which is the size of 8.5 football pitches, will create 650 new jobs and operate as an all-electric delivery service within London's north and south circular area. The facility includes a state-of-the-art conveyor system for on-site sorting of intra-London parcels, solar panels on the parking canopy to charge electric delivery vans, and a 40,000-liter HVO tank for renewable biofuel. (link)

Rivian ends Amazon exclusivity Rivian, the electric vehicle maker, plans to sell its electric delivery vans to new customers as its exclusive deal with Amazon ends. This move coincides with Rivian’s goal to boost its 2023 production of electric pickups, SUVs, and vans. Although initially committed to delivering 100,000 vans to Amazon by 2030, Rivian is expanding its market under CEO R.J. Scaringe. The company's recent earnings call revealed better-than-expected results with a record revenue of $1.34B, mainly from 15,564 vehicle deliveries. Rivian also reported a reduced net loss and is increasing its 2023 production target to 54,000 units, despite broader challenges in the EV market. The company's shares saw a slight increase following this announcement. (link)

Container Shipping Set for Downturn, Hapag-Lloyd Chief Says The container shipping industry is expected to face a downturn in the next few years due to low freight rates, a weak European economy, and geopolitical turmoil, according to Hapag-Lloyd AG CEO Rolf Habben Jansen. Rates for transporting goods in containers are at unsustainably low levels, and it remains uncertain when they will improve. Although concerned about the market, Jansen predicts reasonable growth in shipment volumes for the fourth quarter of 2023 and beyond. Ocean cargo companies, including Hapag-Lloyd, have experienced a decline in profitability, with spot rates falling below break-even levels. Jansen also expressed concerns about global economic issues affecting business sentiment and the need for positive movement in interest rates and inflation. (link)

Reports

The 32nd Annual Study of Logistics and Transportation Trends (Supply Chain Management Review) reveals critical insights into the industry's current challenges and future directions:

• Human Capital Crisis: The industry faces significant challenges regarding labor availability, talent shortages, and rising labor costs. With an average of 0.71 workers available for each open job position in the first seven months of 2023, the talent shortage poses a considerable challenge, especially in a labor-intensive and evolving sector.

• Competitive Shift: The industry is moving from price-based competition to value-based differentiation, with a focus on customer service and innovation.

• Technology Adoption: Embracing modern technology is essential for competitiveness. Over 82% of participants view modern technologies as necessary, with a focus on technologies that offer immediate efficiencies and cost savings.

• Freight Spending Trends: There has been an increase in freight dollars spent on private fleet, truckload, dedicated, and less-than-truckload, with decreases in rail, small package, and parcel.

• Carrier Performance: Most carriers saw a decline in performance metrics like correct invoices, on-time delivery, and damaged shipments, except for rail and truckload in some cases.

Addressing the human capital crisis is critical for the industry’s future. Emphasizing value over cost, adopting modern technology, and focusing on customer satisfaction is vital for success. The future will be shaped by those prioritizing people, harnessing technology, and creating customer value. (link)

Tech

Maersk and iB Cargo deploy Dexory’s robotics and AI technology in Bucharest distribution centre Dexory, a warehouse automation company, has partnered with A.P. Moller–Maersk and Romanian firm Ib Cargo to implement its robotics and digital twin technology at a Romanian distribution center, marking Dexory's first venture outside the UK. The Maersk-operated warehouse, opened in September 2021, has expanded to 100,000 square meters, serving eight countries. The key feature, a robot named 'NEO', significantly increases operational efficiency by scanning over 100,000 pallet locations. This technology enhances inventory management and operational decision-making by creating digital twins and real-time data analysis, optimizing warehouse processes and reducing human error. Dexory's innovation has been recognized at the Robotics & Automation Awards. (link)

Opinion

Why tech companies are offloading their reverse logistics businesses During the pandemic, tech companies eagerly acquired reverse logistics businesses due to a surge in online shopping and returns. However, many are now offloading these acquisitions. PayPal sold Happy Returns to UPS, Affirm shuttered Returnly, and Shopify offloaded Deliverr and 6 River Systems. These shifts indicate the pandemic-driven rush into logistics didn't pan out as expected. Experts believe these acquisitions, initially seen as strategic e-commerce investments, were misaligned due to tech companies' limited understanding of physical logistics. The challenges of reverse logistics, being complex and requiring synergies with core business functions, were underestimated. Leaders in tech companies lacked experience with logistics, leading to unrealistic expectations of standalone solutions in reverse logistics. Despite these divestments, reverse logistics remains crucial in digital commerce, with the potential for significant gains in improving it. (link)

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