Report: Transport and logistics M&A deals up, value down

The total deal value of mergers and acquisitions in the global transportation and logistics industry nearly halved in 2007 despite a 20-year high 1,291 deals, according to PricewaterhouseCoopers.

The accountants' quarterly report, Intersections, shows that total deal value in 2007 dropped to $83 billion from $164 billion in 2006, due in part to several large takeovers, especially in the passenger airline sector, that were announced in 2006 but subsequently collapsed. When excluding withdrawn deals with disclosed value at or above $50 million, total deal values were $73 billion in 2007 and $84 billion in 2006.

The average deal size in 2007 was $426 million, compared to $1 billion in 2006. There were 16 acquisitions with a proposed transaction value of at least $1 billion in 2007, compared to 20 of those so-called mega-deals in the prior year. Of the 20 announced in 2006, 13 were completed with the remaining seven being withdrawn. Ten of the deals announced in 2007 have already been completed and only two have been withdrawn. Excluding withdrawn deals at or over $50 million, the 2007 average deal value in 2007 was $399 million, while the 2006 figure drops to $570 million.

Western European firms were the leading acquisition targets for M&A deals worth more than $50 million in 2007 in terms of deal value and volume, while there was also a notable increase in deal value for Asia Pacific targets. Deals announced for targets in the emerging BRICs nations (Brazil, Russia, India and China) increased 28 percent, due primarily to deals involving firms in China and India. Of the 32 deals announced for BRIC targets, 18 were located in China and Hong Kong, eight of which were announced in the fourth quarter.

PricewaterhouseCoopers said the announced deal value associated with passenger air targets declined in favor of trucking, passenger ground targets, and shipping targets, respectively.

Looking forward, PricewaterhouseCoopers predicts that shipping and passenger air segments are likely to continue to account for large portions of deal value, particularly given the impact of regulatory barriers in the U.S. on other modes of transportation, the company said.

The tighter credit markets did not impact on transactions involving financial investors as expected. Financial investors accounted for nearly 45 percent of deal volume in 2007, up from 40 percent in 2006.

Though financial investors have remained resilient, we expect that strategic investors will continue to account for the majority of transportation and logistics deals as a tight credit market weakens the buying power of financial investors on a relative basis, the report said.

It is likely that emerging market companies will play a significant role as acquirers, given adequate financing sources (including highly valued equity markets) and strong currencies. While the decline in the U.S. dollar has not yet led to a substantial increase in the pace of deals in which a U.S. firm was targeted, we expect a declining dollar to increase the likelihood of future cross-border deals for North American (specifically, U.S.) target companies.

Source:American Shipper