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Logistics sector looks set for more M&As

December 10 - Transport Intelligence has said that the talks between DSV and UTi Worldwide which were revealed in the media last week show that there is an undiminished appetite for mergers and acquisitions in the global logistics industry.

The logistics consultant adds that there were certainly very good reasons behind the potential tie up, combining DSV's strength in Europe with UTi's operations in fast growing Asia, Africa and North America. Even though it looks like the deal won't go ahead, DSV's plans to expand acquisitively must be seen in the context of a transforming economy.

Ten key reasons why the logistics industry would be characterised by increased acquisition activity next year are examined in Ti's latest report (to be published December 16, 2014).

The consultant believes that the global economy (particularly Europe) is forecast to improve, providing companies with more confidence to invest in new markets and sectors, whilst supply chains are reaching into untapped markets in the developing world, increasing the need for global logistics companies to support their multinational clients.

Meanwhile the reverse is also happening. Asian logistics companies are looking to expand their networks into Europe and North America to support the expansion of their customers. In Asia and Latin America, the emergence of a powerful middle class has created more demand for higher value consumer goods, which in turn require a higher level of sophistication of supply chain management.

Other reasons given by the consultant for logistics players to look at mergers and acquisitions were the emergence of e-commerce creating demand for last-mile delivery providers, increasingly sophisticated supply chains requiring investment in niche technology providers, near sourcing in countries such as Turkey and Mexico creating a need for a presence in these countries and the growth of niche sectors such as healthcare and pharmaceutical.

Perhaps, most significantly, Transport Intelligence notes that major corporations and investment institutions such as private equity companies are sitting on large cash piles, with M&A activity providing a means by which they can achieve better returns for investors.

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