Transport and Logistics M&A Lively in 2012’s First Half

The first half of 2012 experienced robust transportation and logistics M&A activity despite unease surrounding the European debt crisis, domestic fiscal issues and the presidential elections, according to analysts at BMO Capital Markets. Several high-profile transactions took place in the rail, logistics and transportation equipment subsectors. While small M&A trades were prevalent in the trucking space, there were few notable transactions.

In the 1st half of 2012 BMO recorded 50 transportation M&A transactions, representing an increase of 19% over the 1st half of 2011. Of the 50 deals, financial terms were disclosed in 17 deals for a total transaction value of $2.5 billion, excluding the acquisition of TNT Express by UPS.

On a disclosed transaction value basis, M&A activity was up 80% from $1.4 billion in the 1st half of 2011. BMO reports the most active acquirer in the 1st half of 2012 was Roadrunner Transportation Systems, an asset-light transportation and logistics services provider. The most sizable transaction was the acquisition of TNT Express by UPS for $6.8 billion representing a multiple of trailing EBITDA of nearly twelve times excluding synergies.

Strategic acquirers drove activity in the M&A market, with 78% of the total deal count, up from 69% in 1st half of 2011. Logistics and truckload transactions dominated activity, accounting for 72% of total transactions. 83% of logistics transactions and 78% of truckload transactions had strategic acquirers.

Despite attractive pricing in the leveraged loan and high-yield markets, strategics were very successful outbidding financial sponsors in auction settings. Logistics names with a specialized/highly value-added service offering, such as World Courier, continued to fetch healthy valuations and a demonstrated growth trajectory remained an important value driver.

“Whether or not the M&A momentum gained in the first half of 2012 in the T&L space continues likely depends substantially on an improvement to current conditions in the eurozone,” BMO analysts conclude. They also note that Genesee & Wyoming, the largest short line railroad operator in North America, recently announced the acquisition of RailAmerica, the second largest short line railroad operator in North America. At $2.0 billion, this represents the largest acquisition in the rail space since Berkshire Hathaway acquired Burlington Northern Sante Fe for $43.8 billion in 2009.

Related Editorial:

Healthy M&A Deals in Manufacturing and Transportation
Manufacturer Optimism and Investment Rising
Supply Chain Planning Linked to Business Growth

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