Transportation M&A Down, but Megadeals are Drivers

This year’s second quarter saw increases in deal value but a decline in deal volume.

While merger and acquisition (M&A) activity in the transportation and logistics industry remains subdued as a result of ongoing global economic concerns, infrastructure mega deals continued to drive deal value at the top of the market in the second quarter of 2013, according PwCUS.

In the second quarter of 2013, there were 31 transportation and logistics transactions worth $50 million or more, totaling $15.2 billion, compared to 51 transactions totaling $14.3 billion in the second quarter of 2012. The increase in deal value over the same period last year can be attributed to the three infrastructure mega deals (worth more than $1 billion) that occurred in the second quarter of 2013. Additionally, average deal size increased to $490 million in the second quarter of 2013, compared to $281 million in the same period in 2012.

“There is a historical correlation between economic output and transportation and logistics M&A, which lends explanation to the decreased volume of deals on a global level,” said Jonathan Kletzel, U.S. transportation and logistics leader for PwC. “The bright spot in the industry is the infrastructure mega deal activity, which is on pace to approximate the levels seen throughout 2012. Given the high M&A volumes that occurred in late 2012, we’re seeing transportation and logistics players, especially in the airline space, focused on integration and driving value from those deals. However, ongoing opportunities for consolidation, especially in emerging markets, along with the need for infrastructure will remain key drivers for potential M&A activity in the rest of the year.”

While strategic investors represented the majority (61 percent) of transportation and logistics deals in the second quarter of 2013, financial investors have shown an increased appetite for shipping and port deals, likely due to potential opportunities to improve performance within an over-capacitated mode.

Regionally, entities in the United States and Eurozone continue to shy away from transportation and logistics dealmaking. The second quarter did see relative strength from Asian acquirers, who engaged in nearly half of all global deals in the second quarter of 2013 in an effort to pursue M&A strategies that consolidate local-markets across modes. Additionally, while Europe dealmakers have stayed on the sidelines, that region, along with South America, seems likely to provide some larger infrastructure deals later this year, according to PwC.

“As we enter the second half of 2013, we expect infrastructure deals to maintain their prominence within the transportation and logistics M&A market. However, while certain regions could be sources of ‘headlining’ deals later this year, it is likely that overall activity will remain muted as economic concerns weigh heavily on the minds of potential acquirers,” concluded Kletzel.

 

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