IT IS perhaps unsurprising that global deal-making contracted somewhat in 2019, given deep economic uncertainties with a trade war and the resulting risk of global recession and the general reduction in Chinese outbound investment.
In Australia, however, and more specifically in the transport and logistics industry, we have seen a consistent level of M&A activity throughout 2019, driven in large part by macro themes such as the inexorable consolidation of a highly fragmented market and the availability of historically cheap finance.
At the ASX-listed level, 2019 has seen a sobering decline in IPO activity. In our view, that theme is set to continue into 2020 although we see the medium-term IPO outlook as promising. However, those already-listed entities in the transport and logistics space were nevertheless relatively active in 2019.
Logistics and shipping activity
In the past year, Qube Holdings, through its logistics subsidiary, completed the acquisition of integrated logistics player Chalmers for an amount in excess of $50m. WiseTech Global acquired Containerchain in addition to a slew of offshore acquisitions, in Norway, Sweden, the US and South Korea, to name a few.
Qantas acquired a 19.9% stake (with a view to taking a majority position in due course) in listed player Alliance Aviation Services for “exposure to the resurgent resources charter market” for around $60m, notwithstanding the ACCC’s ongoing investigation into the effect of the acquisition on competition.
On a global level, Kuehne + Nagel launched a US$50m global investment fund, through its joint venture with the Singaporean government-owned Temasek Holdings.
In the private M&A market, Australia’s largest privately owned shipping operator, Sea Swift, was acquired by Queensland Investment Corporation (owned by the Queensland Government) for a sum of around $300m. QIC also holds a significant stake in the ownership of the Ports of Melbourne and Brisbane.
In late October, the national media flagged Mediterranean Shipping Company’s acquisition of WA-based Integrated Container Logistics, an acquisition which might be “indicative of such [shipping container lines’] intention[s] to expand from their on-water roots and into landside logistics”.
Silk Contract Logistics continued its strong acquisition spree by acquiring Rocke Brothers, a large Victorian-based wharf carrier, to go along with SCL’s prior (recent) acquisitions in Brisbane and Sydney. It is no wonder that informed commentators have pegged SCL as a likely investigator of a share market listing in 2020.
The road ahead
Certain forecasts based on early-stage global due diligence activity yield an expectation of year-on-year M&A growth globally of up to 10% in the first half of 2020. In Australia, however, at least in the short term, we expect any growth to be subdued.
The transport and logistics industry in 2020 is not immune, although (at least at the smaller deal level), we expect themes of consolidation, cheap financing and emerging technologies to be contributing factors to any growth.
Our expectation for 2020, as it has been for a couple of years now, is that the strongest pipeline in the transport and logistics M&A market is in the $50m to $300m range.
* Richard Arrage is a special counsel in the transport and logistics team at Colin Biggers & Paisley
This article appeared in the February 2020 edition of DCN Magazine