Logistics M&A activity is seeing gains amid freight market volatility

In what could be viewed as a largely down freight market in recent years, driven by various factors, including inflation, uneven demand, and sluggish manufacturing, among other factors, a more stable part of the freight market appears to be an increase in logistics-focused mergers and acquisitions (M&A) activity.

That has been made clear, especially in recent months, as evidenced RXO completing its acquisition of Coyote Logistics from UPS last September to become the third largest U.S.-based freight broker, as well as UPS recently completing its acquisitions of Germany-based healthcare logistics services provider Frigo-Trans and its sister company, BPL, and DHL Supply Chain, a subsidiary of Deutsche Post DHL Group, acquiring acquired Inmar Supply Chain Solutions, a division of Inmar Intelligence and a leading returns retail e-commerce services provider, making it the largest North American-based provider of reverse logistics services.

RXO Chief Strategy Officer Jared Weisfeld told LM that there are various factors driving M&A activity in the logistics sector today, including shifting market dynamics and the broader freight environment.  

“The industry experienced extreme fluctuations in recent years, including strong demand and freight rates in the aftermath of the pandemic, followed by a prolonged downturn as freight volumes softened with persistent excess truckload capacity. The cyclical nature of the market presents strategic opportunities for companies to pursue acquisitions, positioning themselves for strong growth when the market recovers. RXO recently acquired Coyote Logistics, doubling down on freight brokerage at the bottom of the cycle, and we expect strategic M&A to continue to play a pivotal role in our business strategy. Additionally, evolving customer expectations are playing a significant role. Shippers and carriers are increasingly looking for end-to-end solutions that offer greater flexibility, enhanced visibility, and access to the latest technology platforms. Through strategic M&A, companies can expand their service offerings, integrate advanced capabilities, and create a more comprehensive value proposition for their customers.” 

Looking ahead, Weisfeld explained that RXO will continue to explore M&A opportunities that fit into its overall business strategy, meaning companies that expand RXO’s service offerings and help its customers fulfill their business needs effectively and efficiently. 

When asked about what should logistics companies look for when seeking M&A opportunities, Weisfeld said that when evaluating potential M&A opportunities, logistics companies should be closely assessing the two organizations’ compatibilities across the board to determine whether the deal would result in strong strategic alignment and a profitable outcome for both parties.

“A few key factors to think about in this process include: how your customers may be impacted, how well the companies’ networks align, if the two companies’ workforces share values and goals that could build a cohesive team, and the complexity of the integration,” he stated. “Leaders should also work to uncover processes that can be streamlined to improve the efficiency of the combined organization.” 

A report recently issued by global business consultancy PwC, entitled “Logistics 2025 Deals Outlook,” found that, for the six-month period ending November 15, 2024, the transportation & logistics sector recorded a total deal value of $51.5 billion with 71 disclosed deals, compared to $39.5 billion and 69 deals, for the six-month period ending May 15, 2024.

PwC observed that even though deal volume is stable, the increase in deal value could serve as a sign of improving investor confidence, paced by things like anticipated profitability, improvements amid rising demand, and supply adjustments.

What’s more, the report pointed out that subsectors such as trucking and maritime freight have had to deal with prolonged lower freight rates, with rates seeing a rebound, due to escalating consumer demand and strategic supply rationalization.

“The trucking industry in particular has seen distressed assets absorbed through mergers and acquisitions (M&A), while the maritime sector has gained advantages from trade route disruptions in the Red Sea and port congestion, which have collectively absorbed excess supply,” said PwC.

And it added that these factors could increase investor interest in M&A activity, with the caveat that there are a few things to keep in mind with President Donald Trump back in office, including:

• the White House’s pursuit of tariffs potentially negatively impacting ocean freight, though domestic North American trucking may gain from a renewed focus on onshoring strategies;
• efforts to resolve geopolitical conflicts, including the Russia-Ukraine war and unrest in the Red Sea, may mitigate supply chain constraints while potentially increasing capacity.;
• a focus on economic stability and growth may lead to greater Federal Trade Commission (FTC) tolerance for dealmaking, thus opening new avenues for sector consolidation; and
• a soft landing in the U.S. economy could spur higher consumer demand, further enhancing M&A opportunities as T&L activity rebounds

In looking at dealmaking prospects for 2025, PwC expects the year to be dynamic, with a rebound driven by substantial capital reserves, lower interest rates, and optimism regarding a soft economic landing.

Regarding interest rates, Mike Ross, PwC's U.S. consumer markets deals leader, explained that recent interest rate cuts issued by the Federal Reserve are expected to have a positive impact on dealmaking activity.

“We anticipate that the recent Federal Reserve rate cuts will be a boost to the dealmaking environment as they increase access to debt financing,” said Ross. “In particular, we would expect these cuts to stimulate renewed interest in the sector from financial buyers who accounted for 23% of deal activity during the 2020 market as compared to only 12% in the most recent six months.”   

As for key transportation and logistics segments to keep a close eye on, for future deals, PwC cited trucking consolidation, railroad logistics innovation, and advancements in logistics technology.

For the former, Ross said that he expects to see an increase in deals focused on or around technology.

“We expect logistics companies will continue to invest in technology and automation especially as it relates to building out data management, AI capabilities, and reimagining their business and operational processes,” he said. “We anticipate that through the M&A transaction process, sellers will be highlighting their technology investments and efficiency gains with the goal of improving valuations.”