Subscribe to our free, weekly email newsletter!


PwC report notes deal activity is down slightly, but market remains resilient

By Jeff Berman, Group News Editor
November 08, 2011

Following the first half of 2011, which showed some signs of increasing transportation and logistics merger & acquisition activity, third quarter activity took a bit of a step back, according to PricewaterhouseCoopers’ (PwC) quarterly report “Intersections: Second Quarter 2011 global transportation and logistics industry mergers and acquisitions analysis.”

PwC said that in the third quarter deal value—for deals valued at $50 million or more—was $11.3 billion—representing 39 announced deals. This was down from the 46 deals at that level in the second quarter, which accounted for $13.4 billion. First quarter deal value was $10.4 billion. Of the 39 announced deals for the third quarter, eight involved U.S.-based targets or acquirers.

Even with the sequential decline in deal value from the second quarter to the third quarter average deal value—at $290 million—was ahead of the first two quarters at $272 million.

Deals cited by PwC in the Intersections report represent all announced deals for the quarter-as opposed to completed deals only-and the report does not parse out deals that are withdrawn, intended, or pending.

The report’s authors said that the pace of deal making activity was down somewhat in the third quarter, due to less activity occurring in emerging markets, as well as European debt issues, and the possibility of a double-dip recession in the United States. But even with these significant negative headwinds, the PwC described the current deal making environment as result in light of these macroeconomic trends.

“We were a little surprised by the resilience of the deal market,” said PwC U.S. Transportation and Logistics Sector Leader Ken Evans in an interview. “Things were a little spotty among all modes, and we are seeing a slight increase in distressed deals, especially with ocean shipping freight rates at all-time lows and related struggles on the international shipping front.”

And even though the economic outlook remains uncertain, Evans said there are an abundance of potential buyers with significant cash and are willing to make moves on the right companies.

He added that in many cases that the due diligence and due process in most cases for deals goes beyond three months and while PwC goes off of announcement dates for deals, the firm notes that many of these deals were initiated before that, which creates a level of lagging that kept announced deal levels relatively high in the third quarter.

Looking ahead to the fourth quarter, with stock market gyrations and the issues with the European economy and Greece, specifically, Evans expects some players to move to the sidelines in the fourth quarter and wait to see how things play out.

PwC Transportation Analyst Michael Portnoy noted that “one of the things most surprising in this report was how resilient the U.S. and Europe were compared to emerging markets.”

When breaking down deals by transportation and logistics modes, PwC found the following: trucking accounted for 11 percent; logistics at 20 percent; passenger ground at 24 percent; shipping at 38 percent; and 7 percent at passenger air. Portnoy and Evans said that these percentage allocations are driven by the mega deal activity which occurred in the quarter, with four announced deals valued at more than $1 billion. Among these deals were a pending acquisition of GE SeaCo Ltd for $1.05 billion by an investor group announced in August and a pending $1.75 billion acquisition of Korea Express Co Ltd by an investor group announced in July.

In terms of deals that have a specific shipper- or transportation and logistics-related focus, Evans pointed to infrastructure-related deals.

“Infrastructure continues to gain traction for mega deals because of the number of years that companies are signing up for concessions with, in most cases, the government,” said Evans. “They tend to be large deals that are heavily focused and sometimes combined deals with strategic and financial investors and almost always have a financial player involved. There remains a continuing focus on these deals, with various world economies really needing the funds to develop infrastructure and build new rail lines and roads that require extensive financial involvement.”

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Lyon, France-based Norbert Dentressangle, a $5.5 billion global third-party logistics (3PL) services provider focused on global logistics, transport, ocean, and air services, said today it has acquired Des Moines, Iowa-based Jacobson Companies, a value-added warehousing (VAW) company, for $750 million from private equity firm Oak Hill Capital Partners.

Download the newly released research report, "Transportation Management Systems" conducted by Peerless Research Group (PRG) on behalf of Supply Chain Management Review and Logistics Management magazines. Learn what logistic experts are saying about their current supply chain technology infrastructures, how they tackle the transportation component, and revealed the gaps that still need to be filled in order to attain end to-end visibility of a streamlined supply chain.

From cost center to growth center. Get insightful opinions on changes in the marketplace from this independent survey of warehouse personnel. Motorola Solutions examined the current warehousing marketplace in our 2013 Warehouse Vision Report, conducted April-May of 2013.

Even though not all publicly-traded less-than-truckload carriers (LTL) have posted second quarter earnings yet, the early consensus for those that have issued results is looking very good.

The advance estimate for second quarter GDP at 4.0 percent could serve as a sign of a steadier and improving economy.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA