Transportation and logistics M&A activity in second quarter up slightly, says PwC
August 02, 2013
Merger and acquisition (M&A) activity in the transportation and logistics sectors in the second quarter was up slightly on an annual basis, according to data released this week by Pricewaterhouse Coopers.
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all announced deals for the quarter-as opposed to completed deals only-and the report does not parse out deals that are withdrawn, intended, or pending.
Second quarter deal value—for deals valued at $50 million or more—was $15.2 billion and represents 31 announced deals compared to the second quarter of 2012, which had 51 deals totaling $14.3 billion. And the average deal size for the quarter at $490 million topped last year’s $281 million. PwC attributed the annual gain to three “infrastructure mega deals” worth more than $1 billion.
In the report, PwC noted that infrastructure-related deals should lead the way for M&A transactions in the transportation and logistics sector, especially in South America and Europe.
“What we are seeing is not a bad environment for deal making but not a great environment for it either,” said Jonathan Kletzel, U.S. transportation and logistics advisory leader for PwC, in an interview. “There are some signs of improvement from a global economy and geopolitical perspective over the last decade but things are largely flat.”
The report observed that in the second quarter strategic investors accounted for 61 percent of deals, while financial investors are showing an increased appetite for shipping and port-related deals that could likely be due to prolonged overcapacity in the ocean shipping sector.
Kletzel said there is a feeling among investors that as various modes have recovered, ocean shipping could be next, leading to more opportunities for better margins in that sector.
Deal making activity in the United States and Europe is somewhat tempered compared to other parts of the world, according to PwC. The firm explained that the slower pace of deal making activity in these region is due in large part—especially in Europe—to companies largely remaining idle, or on the sidelines. What’s more, it pointed out that the respective economic challenges in each region are impacting activity, too, but that the near-term outlook for the U.S. is likely brighter due to the emergence of shale gas-related activity and the recent upswing in manufacturing activity, too.
“Those two trends are going to have a significant impact on the transportation industry over the next five-to-ten years in the U.S., especially in the upper-midwest area of the country,” he said.
As for the remainder of 2013, PwC expects infrastructure-related deals to lead deal-making activity, although certain regions could be sources of what PwC called headlining deals, but cautioned that economic activity is likely to remain muted due to economic concerns acquisition acquirers may have.
The breakdown by mode for deals valued at $50 million or more in the second quarter was as follows: 32 percent shipping, 32 percent passenger ground, 13 percent logistics, 3 percent trucking, and 10 percent rail.
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