Healthy M&A Activity in Transportation Sector

Despite overall concerns about European debt markets and uncertainty surrounding economic growth in North America, transportation related merger and acquisition (M&A) activity improved in 2011 compared to 2010, according to a report from BMO Capital Markets. There were 113 transportation M&A transactions in 2011, representing an increase of 28% over the 88 deals in 2010 (U.S. and Canada).

As the economy continued its indecisive nature, transportation freight volumes crept slowly towards a healthy recovery throughout 2011 and input prices continued to stabilize. As a result, transportation companies were highly acquisitive throughout 2011. Keys to this improvement have been 1) improved buyer balance sheets, 2) increased access to debt from banks and capital markets, 3) higher confidence from buyers that projected financial performance will be stable and show incremental growth and 4) increased likelihood for owners to sell due to increased valuations.

Small strategic acquisitions seemed to be a theme in 2011. Large strategic players with cash stockpiles made small acquisitions to improve their strategic positions and strengthen or broaden growing business segments. Strategic investors were relatively well positioned to engage in new deals in 2011, though some still continue to wait for economic conditions to improve.

Strategic acquirers continued to dominate the M&A landscape this year, accounting for 76% of deals. Of the 113 M&A transactions in 2011, financial terms of the transactions were disclosed in 38 deals for a total value of $2.6 billion, up from $1.7 billion (excl. acquisition of BNSF) in 2010.

The median reported transaction value in 2011 was $20 million, down from $80 million in 2010. In the first half of 2011, there were 42 M&A transactions, or 37% of the total deals for the year. M&A activity picked up with 71 transactions, or 63% of the total deals for the year, completed during the second half of the year.

Transportation-related M&A activity has been building significant momentum since 2009, with 2011 narrowing the gap from the 2006-2008 average of 141 deals to 113 deals (off 20%).

The truckload and logistics sector accounted for most of the activity, with 34% and 29% of 2011 deals, respectively. The truckload sector had the highest number of transactions with 39 in 2011, versus 20 in 2010. Logistics was a close second with 33 deals in 2011, versus 44 in 2010. Within the truckload industry, strategic buyers were involved in 77% of deals.

In 2012 BMO expects transportation related M&A activity to continue to heat-up. There is a strong backlog of sponsor owned transportation assets that should be up for sale in 2012.

Pulled IPOs, solid growth in the transportation space and a strengthening global economy will be catalysts for M&A activity in 2012.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.