Infrastructure Projects Driving Transportation M&A Deals

Feb. 7, 2013
Developing countries represent growing opportunity for mega deals.

Transportation and logistics merger and acquisition deal volume will grow 22% this year, according to PwC’s quarterly analysis of deal activity in this sector. This forecast is primarily driven by expectations for a slight acceleration in global GDP growth during 2013 due to stronger output from emerging and developing economies.

This forecast represents a rebound from the decline in total disclosed and undisclosed volume experienced during 2012 (as opposed to deal value, which increased in 2012 vs. 2011). PwC’s analysts provide a caveat, noting that risks to the global economy could provide a downside to 2013 results. In that case, the passenger-related side of transportation may hold up somewhat better than freight-related M&A.

“Freight transportation tends to be driven by the level of inventories, which can fluctuate significantly over the course of the business cycle,” the analysts say.

However, it’s possible that freight will continue to account for the largest share of the market in 2013, they add. Their analysis shows the growing importance of infrastructure to overall transportation M&A over the last five years, compared with prior periods.

“While the privatization of road assets may not receive as much attention as some airport and port deals, the majority of transportation infrastructure deals are road concessions, likely due to the larger number of potential assets available for purchase relative to airports and ports,” they continue. “These infrastructure deals are growing in their importance to the top end of the market.”

The majority of mega deals with a value of at least $1 billion in 2012 were for infrastructure targets. This is a significant increase over their contribution in 2011, according to the PwC report. It states that these deals will become more important to overall sector M&A due to budget pressures in developed countries and the need to bring in more investment to support growth in emerging and developing countries.

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