Road Haulage – Consolidation driving significant merger & acquisition demand

The road haulage sector is key to the UK economy being worth c£26 billion per year, with over 52,000 businesses and directly employing half a million people. The sector is also key to the North West economy which represents approximately 15% of the national road haulage sector.

A recent survey by a trade body Logistics UK has identified that the sector has been resilient in the face of the challenges created by Brexit and Covid-19, and is expected to experience significant short and medium term growth, and to play a significant role in the UK’s recovery from the pandemic.

Those operators seeing the greatest growth have been those focused on healthcare, e-fulfilment, food manufacturing and retail. At MHA Moore and Smalley, we have noticed operators outside these market niches have often been able to quickly diversify to benefit from opportunities in these sectors.

The sector continues to be fragmented with a large number of relatively small owner managed operators. This had created significant consolidation prior to the pandemic as operators sought to grow through acquisition, and benefit from the economies of scale.

What is driving merger and acquisition within the haulage sector?

The drive to consolidation has gained momentum by Brexit and other regulatory changes. Driver recruitment issues have also focused management on growing through acquisition as a means to expand driver capacity and improve efficiencies.  

The structural consolidation trend which had started prior to the pandemic, coupled with strong growth prospects is expected to generate significant M&A activity in the sector in the short and medium term.  

The survey suggests that a third of operators are more likely to undertake a transaction in the coming months, with a similar response from both large and smaller operators. This includes operators looking to acquire or sell.   

If the above response is reflective of the wider sector, given the size of the overall sector this would suggest a significant number of businesses will look to undertake a transaction in the coming months.  

Will organisations be able to secure funding to acquire businesses?

Although the funding environment across the economy has generally tightened following the CBILS loan scheme coming to an end in March, and uncertainties around the recovery loan scheme, the asset based lending (ABL) market has been less impacted and remains very competitive.  

Many haulage operators have significant assets (vehicles, property, trade debtors) which can be used as security by ABL funders. Therefore, many businesses in the sector will benefit from the availability of ABL funding for transactions.  

Therefore the market conditions suggest that owners looking to achieve an exit either through a trade sale or a sale to management (including via EOT’s) or to grow through acquisition should consider starting a process in the near future. 

How can MHA Moore and Smalley help?

Our award-winning Corporate Finance team at MHA Moore & Smalley has significant experience in the transport sector having recently completed several transactions.  

If you would like to discuss your acquisition or exit planning options further please contact Ian Waddingham from the Corporate Finance Team on 01615195050.