PwC report shows promising signs for transportation and logistics deals in 2012

First quarter deal value—for deals valued at $50 million or more—was $22.6 billion and represents 34 announced deals with an average deal value of $700 million.

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Spurred on by five major deals valued at $1 billion or more, first quarter transportation and logistics merger & acquisition activity began 2012 on a strong note, according to PricewaterhouseCoopers (PwC) quarterly report “Intersections: First Quarter 2012 global transportation and logistics industry mergers and acquisitions analysis.”

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all announced deals for the quarter-as opposed to completed deals only-and the report does not parse out deals that are withdrawn, intended, or pending.

First quarter deal value—for deals valued at $50 million or more—was $22.6 billion and represents 34 announced deals with an average deal value of $700 million, outpacing the fourth quarter of 2011 at $12.8 billion and 32 announced deals. It was below the first quarter of 2011 which saw 48 announced deals, but lagged in total deal value of $11.3 billion and an average deal value of $200 million. Of the 34 announced fourth quarter deals, four involved U.S.-based targets or acquirers.

The breakdown by mode for deals valued at $50 million or more in the first quarter was as follows: 38 percent were passenger air, 2 percent were shipping, 17 percent were passenger ground, 38 percent were passenger ground, 5 percent were rail, and 1 percent was in the “other” category.

The biggest deal of the quarter was UPS’s announced intention to acquire TNT Express for $6.8 billion. Three other deals had to do with Brazil-based passenger airports, and the fifth involved a Portugal-based passenger rail line.

“The UPS-TNT deal was very significant and served as a continuation of the theme that logistics services providers are active in stretching their global reach,” said PwC U.S. Transportation and Logistics Sector Leader Ken Evans in an interview. “International companies would like to compete in the U.S., and companies like FedEx and UPS are obviously interested in expanding their global footprint.”

Looking at deals by continent, PwC reported the following deal activity: 5 North America deals valued at $7.8 billion; 11 European deals valued at $10.8 billion; 8 South America deals valued at $9.4 billion; 3 Africa deals valued at $0.3 billion; and 13 Asia & Oceania deals valued at $2.8 billion.

Evans said that 2012 has strong potential to be a good year for transportation and logistics deal-making activity on the heels of a solid 2011, which were more closely in line with pre-recession levels.

“The fourth quarter of 2011 and the first quarter of 2012 were similar in the number of deals [35 compared to 34] with larger deal value in the first quarter of 2012,” explained Evans. “I feel very good that we are not on a down trajectory, considering that historically second and third quarters have some of the most active quarters of the year. I think more companies have liquidity and things are likely to be active for the balance of the year.”

With only four deals involving a U.S.-based target or acquirer, which has been the case for the past several quarters, Evans said this is a long trend that is likely to turn around. The length of the recession and the slow nature of the recovery serve as cautionary signs to an extent, coupled with a polarized political environment in the U.S. during an election year, which could very well result in what Evans described as five total months of uncertainty.

When asked about the most promising components of future deal-making activity, Evans said the logistics services area has been driving a lot of activity and it could continue, with some future consolidation likely to occur.

“In the U.S. trucking market, there are also some good possibilities for deals,” said Evans. “In some instances, it looks like companies are interested in making deals related to labor, as well as buying assets or customers.”

And with the transportation and logistics sectors expected to grow significantly over the next 15-to-20 years, Evans said that will necessitate more people working in those sectors than there currently are, which, in turn, could result in increased deal making activity.


About the Author

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. Contact Jeff Berman

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Merger and Acquisition · PwC · All Topics
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