Survey: Volatility head and shoulders above other concerns

82% OF respondents said changing levels of demand or volume was the biggest challenge facing their business at the moment. Customer pricing pressure and customers’ changing service level expectations made up the top three – above the likes of fuel and energy costs, disruption in the supply chain, staff shortages and costs.

More than half of the respondents (59%) said they intend to focus investment on technology that will drive efficiencies, with 53% admitting they plan to add to their existing customer base by entering new end markets, both domestically and internationally.

The poll also confirmed the growing prominence of technology in the logistics and supply chain management industry. In the next five years, 59% of the attendees believed there will be a wider use of technology in supply chain processes, such as AI and big data, with more automation being introduced business wide, including warehouse automation, autonomous vehicles, 3D printing, and the increasing use of drones.

BDO M&A partner Jason Whitworth, said: “Technology is shaping decisions being made by investors, who are increasingly being attracted by those businesses willing to push boundaries and innovate in response to a changing market.”

James Lean of Barclays Corporate Banking, added: “Capital expenditure remains a key and somewhat unavoidable priority for the sector despite volatility in volumes, with a majority of clients anticipating significant spend on driving even more efficient service models, quenching the customer thirst for data and adopting emerging ESG-related technologies. Many eyes within the sector will be keenly focussed on seeing how operators get on with their trials of larger 7.5 to 19 ton electric trucks, HVO diesel and potentially hydrogen fuel cells.”

Money drying up

The poll follows the publication of BDO’s the ‘UK & Ireland M&A Update – Q1 2023’. It shows that deal activity in the UK logistics and supply chain management sector got off to a ‘slow start’ in 2023, with deal volume and value falling sharply in the first quarter of the year.

Transaction volumes dropped by more than a quarter between January and March 2023, compared to the previous quarter, with 13 deals completed (17 in Q4 2023) at a total disclosed deal value of just over £70 million – as compared to £378 million for the previous three months.

According to the latest report, in the first quarter of the year, 38% of deals were cross-border. This compares to 60% in Q4 2023. Private equity investment was also lower in Q1, with one transaction involving direct PE investment; however, three acquisitions were completed by PE-backed businesses, demonstrating the continued influence of private equity in the sector.