Well-capitalised operators becoming more acquisitive

The convergence of a mergers and acquisitions cycle, the Iran war shock and AI adoption are rapidly dividing the consolidation sector into two tiers. The first tier, which is well-capitalised, technology- enabled, multimodal, with deep carrier relationships and integrated customs capability, is becoming more valuable and more acquisitive. The second tier, which is operationally fragile, manually intensive and route- dependent, faces existential pressure, according to industry analysts. Technology, however, could disrupt this balance. “What’s powerful about AI in logistics is that it closes the capability gap,” says Dylan Govender, head of supply chain at Investec Business Banking. “The benefits of AI are no longer limited to large multinationals, thanks to affordable cloud platforms and subscription-based tools that are now putting AI within reach for mid-market operators too. “What separates successful adopters isn’t scale, it’s strategy. The businesses seeing results are those that start small, target specific pain points and focus on ROI over hype,” says Govender. Smaller tech-driven consolidators could, therefore, also become targets for mergers and acquisitions, which are concentrating commercial power throughout the logistics sector, including consolidation, shipping, freight forwarding and road transport operators. Having ready access to capital will help determine the winners in a world where mid- tier consolidators face a stark choice: grow through acquisition or risk being absorbed. Consolidators, including NVOCCs (Non-Vessel Operating Common Carriers), are being squeezed between carrier surcharges and shipper price sensitivity. Most of the big shipping companies have imposed surcharges for Gulf- bound containers, while insurance rates have also increased. Cargo has also been delayed or rerouted as shipping lines have cancelled calls on the Gulf. “Rerouting around the Cape is adding 10-14 days to global shipping cycles, disrupting production schedules and seasonal demand planning, while war-risk premiums, fuel surcharges and container rate hikes are being imposed rapidly, placing immediate pressure on cash flow,” says Paul Vos, regional managing director of CIPS Southern Africa. For consolidators, vessel delays or cancellations lead to disaggregation and reassignment of loads, resulting in rehandling costs and customer service issues. The consolidators may be forced to absorb some or all of the costs. Another challenge is the availability of containers, as disrupted trade lanes reduce the number of empty boxes in the system. Acquisitions are seldom plain sailing. Michael Wildish of TD Securities warns that trade tensions, supply chain reassessments and reshoring efforts have made cross- border deals more challenging. “These factors have encouraged buyers to be more selective and strategic when pursuing international opportunities,” he advises. It is too soon to write off the second tier of operators. ER