David Roberts of corporate finance team Freight Mergers gives his thoughts on the first quarter of 2019 and what lies ahead for deal activity for the rest of the year…

In a time where Brexit has hijacked the media, it’s been an incredibly tough time for UK businesses that simply seek clarity on what a departure from the European Union could look like. The freight industry is a cornerstone for the British economy and a sector that desperately requires political certainty. It is reassuring to see so many companies working closely with their customers to form plans on how to navigate the process in the most seamless manner. Developing contingency plans and enhanced supply chain and customs structures will certainly mitigate the impact Brexit has on their customers.

As we are aware, with volatility comes opportunity. It is evident that many freight forwarders are trying to capitalise on this uncertainty by exploring new international markets and trade lanes, whilst also identifying opportunities to deliver new domestic services, should we leave the single market and the EU customs union.

Successful transaction

The Freight Mergers team successfully advised the shareholders of an East Midlands-based freight forwarder on the sale of the business. The buyer provides a full range of air, land and ocean freight services globally. This deal completed in February and saw the management retained in the business, helping to ensure that synergy benefits are fully realised, whilst maintaining
a smooth flow in the day-to-day operations.

UK meetings 

It has been fantastic to meet key decision makers throughout the UK in recent months. The freight industry has some of the most dynamic, driven and proactive people within it. It is reassuring to see businesses performing well in such uncertain times. The team and I have discussed various stages of the M&A process with an array of business owners during Q1, with a large proportion of our meetings revolving around market appetite and valuations. It is an ever-changing landscape and we are always keen to talk about the types of offer you could expect to achieve, were you to begin the sale process in the current market.

Sector appetite

Growth by acquisition presents an opportunity for both companies in the process and their respective shareholders, staff, customers and suppliers. The strategic benefit for freight companies is the opportunity to cross-sell services and to enable better buying power with the carriers, due to the increased freight volume a merge brings. The fact remains that many companies establish themselves and later solidify their position within the market by acquiring successful, service-oriented, family-owned companies. Finding opportunities which fit culturally as well as strategically is still very high on the agendas of both private and listed, forwarding and transportation companies, which aim to further capitalise on the fragmented market that remains.

I envisage further activity for the remainder of the year, as companies attempt to enhance their network and coverage both domestically and internationally. Currently, we are seeing many owner-managed businesses engaging in the sale process, whether that is to secure a long term future for their employees and customers, or to continue their growth with the additional financing a larger group can bring. Additional skillsets, knowledge and experience which arise during M&A help buyers enhance their service offering and geographical coverage. This should in turn deliver higher levels of customer satisfaction, an objective for nearly all privately owned companies.

I am optimistic for the M&A market during 2019; I still observe a lot of confidence amongst our clients that there is economic growth and, as such, M&A appetite remains strong amongst C-suite executives. We are always seeking dynamic, growing businesses to work with. If you are considering your strategic options for 2019 and beyond, I would be delighted to discuss this with you and share my thoughts. Please contact me or a member of my team on the details below.

David Roberts, Senior M&A Consultant, Freight Mergers