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Megadeals Push Value of Transportation Mergers Over $27 Billion in Q1

May 18, 2015
Merger and acquisition (M&A) activity in the transportation and logistics industry had mixed results in the first quarter of 2015, as overall volume declined sequentially but deal value increased.

Merger and acquisition (M&A) activity in the transportation and logistics industry had mixed results in the first quarter of 2015, as overall volume declined sequentially but deal value increased, according to consulting firm PwC US. Megadeal activity (transactions worth more than $1 billion) was the primary driver behind the increase in value, accounting for almost 55% of total deal value for the quarter.

In the first quarter of 2015, there were 54 announced transactions (worth $50 million or more), for a total value of $27.2 billion. This represents a slight dip from 62 deals in the previous quarter, but the overall value increased by $5.8 billion. On a year-over-year basis, both value and volume surpassed the 44 transactions worth $17.7 billion in first quarter of last year. Five megadeals in the first quarter totaled $14.9 billion and were largely driven by acquirers from Asia and Oceania. As a result of the substantially larger deals being done, average deal value increased by 46% over the fourth quarter of 2014.

“The transportation and logistics industry got off to a strong start in the first quarter this year as deal value and volume continued its steady climb back from recent historic lows,” says Jonathan Kletzel, U.S. transportation and logistics leader for PwC. “The financial marketplace is booming with overall M&A at record levels and surging capital markets, which may make this a favorable time for transportation executives to consider acquisitions. The strong dollar making acquisitions cheaper for U.S. acquirers looking to invest in targets abroad, continued recovery by advanced economies and low global fuel costs are all good indications that the environment may be ripe for transportation M&A in the year ahead.”

According to PwC, Asia and Oceania accounted for the majority of deal value and volume in the first quarter. Driven by activity involving China, Australia, Japan and Singapore totaling $13.5 billion, the region accounted for more than 90% of total megadeal value. Reversing a recent trend, cross-border transactions gained significant momentum in the first quarter, accounting for almost 43% of all deals; however, acquirers from advanced nations were far more likely to be involved in these transactions than emerging economies. A majority of cross-border activity was driven by strategic acquirers looking to improve geographic reach and increase long-term growth.

Similar to the previous quarter, trucking deals remained prominent in the first quarter; however, activity was driven by the passenger ground and logistics industries, accounting for 40% of total deals. Passenger ground deals in particular experienced a significant uptick in volume to 20%, compared to just 12% in all of 2014. One key driver of improved activity across all modes will likely be the decline in fuel costs globally as diesel and gasoline prices hit their lowest level since 2009.

“While trucking deals dipped slightly in the first quarter, we expect them to remain an area of focus for the industry given the highly fragmented nature in that mode of transportation and the prevalence of smaller players that are ripe for consolidation as bolt-on acquisitions,” Kletzel says. “As the industry seeks greater efficiency, and large to medium-sized companies look for growth rates higher than can be achieved through strategic means, these smaller companies may be prime targets for the larger players.”

PwC’s transportation and logistics M&A analysis is a quarterly report of announced global transactions with value greater than $50 million analyzed by PwC using transaction data from Thomson Reuters.

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