One otherwise unexpected source of higher deal flow and valuations this year is retail, said M&A professionals surveyed by Grant Thornton. While retail M&A never led last year’s league tables, activity was more robust than an understandably muted 2020. Supply chain constraints continue to loom large, however, with 57 percent of those polled saying their deals have been delayed or cancelled due to related issues.
Some of the most interesting findings? Despite the logistics-related risks, bottlenecks also presented an opportunity for deals for corporates in particular, 33 percent of whom were positive on the logjam’s impact on their M&A prospects. Private equity was a bit less sanguine, agreeing with the statement to the tune of 20 percent. But the upside is clear for those with dealmaking teams in search of it.
Examples abound. A.P. Moller – Maersk purchased end-to-end and last-mile services provider Pilot Freight Services from private equity firm ATL Partners and institutional investor British Columbia Investment Management Corp for $1.5 billion last month. Amazon nearly doubled its fourth quarter profit in recently announced results, proof that logistics can overcome current conditions. And suppliers with smaller footprints are turning to more flexible—if more expensive—forms of transport like long-haul trucking to avoid the complexity of intermodal shipping.
Some of that increased dealmaking energy may come from technology, as a sponsor told me. The pandemic has created more lucrative opportunities in restaurant tech, for instance, than brick and mortar locations. The digital transformation wave is breaking against all shores; even face-to-face businesses where it was once thought unlikely. In fact, survey respondents bet operations that had combined physical and e-commerce footprints would be most in demand.
–Brandon Zero
