Subscribe to our free, weekly email newsletter!


Q3 transportation and logistics M&A activity is up slightly, reports PwC

By Jeff Berman, Group News Editor
November 12, 2013

Pricewaterhouse Coopers (PwC) reported that third quarter merger and acquisition (M&A) activity in the transportation and logistics sectors saw a slight bump.

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announced deals for the quarter-as opposed to completed deals only-and the report does not parse out deals that are withdrawn, intended, or pending.

Third quarter deal value—for deals valued at $50 million or more—was $10.2 billion and represents 40 announced deals compared to the second quarter, which had 37 deals totaling $16.3 billion. Even though there was a sequential gain, PwC described total deal value as “anemic,” with the weakest quarterly average deal size—$256 million—in the last four years. And on an annual basis, deal value and volume for the quarter fell compared to a year ago, which saw 42 deals for a cumulative $19.5 billion.

PwC noted that deal activity in the third quarter was paced by smaller, local market deals as opposed to larger deals that lead to higher overall value. The firm also said that with a number of quality assets expected to come to market, there may be an increase in large infrastructure deal activity through the end of 2013 and into 2014 that could in turn lead to improving M&A value for the sector.

There were several reasons for lower deal volumes in the third quarter, according to Jonathan Kletzel, U.S. transportation and logistics leader for PWC, including weaker financial investment and less deal flow involving Europe (which is down to near historic lows).

But the primary driver is that the overall M&A cycle for the transportation and logistics sector is maturing along with the global economy,” Kletzel told LM. “Historically there is a strong relationship between T&L deals and global economic output.”

In terms of the quality assets that could translate into more infrastructure-related deal activity, Kletzel said this area is mainly comprised of transportation infrastructure and state-owned transportation company privatizations, explaining there is usually better visibility into these types of deals since these are announced well in advance of the actual auctions/bidding.

“For example, there are several large railway, port and airline privatizations being discussed in Russia and Greece,” he said. “Also Brazil has discussed bringing more private investment into their airports and ports. The caveat is that these deals can often be pushed back for a variety of reasons.”

While there is currently a focus on smaller, local market acquisitions at the moment, Kletzel said it is unlikely to last into the long-term.

The reason, he said, is that smaller deal sizes and more local-market transactions are reflective of where things are in the M&A cycle after the recent post-global recession peak.

“When the deal market weakens, we typically see more of a focus on smaller, easier-to-execute, local deals,” he noted. “When the M&A market picks back up we tend to see more, larger, cross-border deals. In addition, as local-markets consolidate the larger national players tend to need to seek international growth through acquisition to the extent regulations allow. So we don’t expect that the shift toward smaller local-deals represents a structural change in the deal market for the transportation and logistics sector.”

Looking at investor types for transportation and logistics M&A activity, PwC said that in the third quarter strategic investors accounted for 75 percent of total deal volume, while the remaining 25 percent on the financial side is focused on deals of a smaller nature and also includes minority stakes in port services.

Kletzel said that despite their attenuated role in the overall deal market, financial investors have been paying relatively high valuations for their recent announcements, and have thus contributed to an overall rise in valuation for transportation M&A.

On a geographic, basis, PwC said Asia and Oceania are leading in terms of deal value and volume, with the U.S. heading up due to local market trucking and passenger air deals, and Eurozone deal making activity is on pace for one of its lowest totals in the last decade.

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

Last week, the United States Department of Transportation took further steps to address various issues identified in recent train accidents involving crude oil and ethanol shipped by rail. The announcement was made by DOT with other DOT agencies, including the Federal Railroad Administration (FRA) and the Pipeline and Hazardous Materials Safety Administration (PHMSA).

Logistics Management Group News Editor Jeff Berman had an opportunity to interview Derek Leathers, President and Chief Operating Officer of Werner Enterprises, at this month's NASSTRAC Shippers Conference and Transportation Expo in Orlando. They discussed various aspects of the truckload market, including prices, fuel, and regulations.

During this webcast our presenters will apply the findings of the 23rd Annual Trends & Issues in Transportation and Logistics Study to the world of shipper-carrier decision making. They'll examine the primary aspects that will influence the future direction for shipper-carrier decision-making.

For February, the month for which most recent data is available, the SCI dropped to -1.0 from January’s 2.6, with FTR explaining that the short term positive impact from one-time adjustments for rapidly dropping diesel prices and the suspension of the 2013 motor carriers hours-of-service expires later this year.

Seasonally-adjusted (SA) for-hire truck tonnage in March was up 1.1 percent on the heels of a revised 2.8 percent (from 3.1 percent) February decline, with the SA index at 133.5 (2000=100). This is off 0.3 percent from the all-time high for the SA of 135.8 from January 2015 and is up 5 percent annually.

Article Topics

News · PwC · Merger and Acquisition · All topics

Comments

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


© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA