Q1 M u.A activity in transportation & logistics sector indicates recovery
A general increase in merger & acquisition activity during the first quarter is a sign of recovery in the global transportation and logistics sector, according to a new PricewaterhouseCoopers report. 34 deals were announced in the first quarter of 2010, which exceeds the total number of deals announced in each of the four quarters last year. Additionally, this quarter’s aggregate deal value is on track to approach the value level of 2009. However, when excluding a major rail transaction from the 2009 totals, the 2010 deal value is actually set to far exceed last year’s level. This improvement may indicate that acquirers are gaining confidence to engage in larger deals. "The positioning of acquirers to engage in deal activity continues to improve, supported by generally higher levels of traffic as well as better liquidity and capital market conditions," said Kenneth Evans, US transportation & logistics leader for PricewaterhouseCoopers. "Rising expectations for economic growth may encourage those acquirers who have remained on the sideline to re-enter the deal market." Despite improved conditions for raising capital, minority stake purchases jumped in the first quarter of 2010, and deal participation shifted slightly toward strategic investors. While the increase in minority stake purchases continues a trend from Q4 2009, the shift toward strategic investment is a trend reversal from the previous quarter, in which financial investor participation had improved on a relative basis. The relative level of M&A activity for Asia and Oceania targets increased throughout 2009 and in Q1 2010. Asia and Oceania targets accounted for approximately half of all announcements in 2009 as well as in the first quarter of this year, compared to approximately 35% in 2008. A single passenger air mega-deal in Q1 2010 led Asia and Oceania acquirers and targets to account for the majority of deal value, comprising 78% of deal value by target region. According to Klaus-Dieter Ruske, global transportation & logistics leader for PricewaterhouseCoopers, acquirers in the Asia and Oceania region and in emerging and developing economies are increasingly making their presence felt in M&A activity relative to acquirers outside these areas. "This growth has been driven by deals involving Chinese entities, in addition to a concurrent decline in deals by European acquirers," said Ruske. As the global economy begins to recover, deal making might offer the leverage that T&L companies need to push ahead of the competition. Companies with strong balance sheets and robust cash reserves are expected to be in the best position for strategic M&A opportunities. However, T&L companies should consider the effect of two years of economic contraction on the balance of supply and demand within the value chain, as well as the cost structure impact of certain issues including healthcare, climate change, commodity prices, pension plan structures, and changing tax laws. M&A activity inevitably generates a certain amount of immediacy, therefore any companies that might be rusty in the area of due diligence (because few – if any – deals were completed during the past two years) may need to dust off their existing processes and ensure they have the right resources in place so they are ready when an M&A opportunity arises. |