Transportation and logistics M&A activity holds steady, says PwC report

Transportation and logistics merger & acquisition deal activity in the second quarter continued the solid momentum seen in the first quarter and also was in line with deal making activity from the same quarter last year, according to PricewaterhouseCoopers (PwC) quarterly report, entitled “Intersections: Second Quarter 2012 global transportation and logistics industry mergers and acquisitions analysis.”

Deals cited by PwC in the Intersections report represent all announced deals for the quarter-as opposed to completed deals only-and the report does not parse out deals that are withdrawn, intended, or pending.

Second quarter deal value—for deals valued at $50 million or more—was $12.6 billion and represents 45 announced deals with an average deal value of $300 million, matching up closely with the second quarter of 2011 at 46 announced deals, a total deal value of $13.4 billion and an average deal value of $300 million. The number of deals topped the first quarter’s 35 but average deal value was about double the second quarter at $24.7 million and average deal value for the first quarter was $700 million.

Of the 45 announced fourth quarter deals, 12 involved U.S.-based targets or acquirers.

The breakdown by mode for deals valued at $50 million or more in the first quarter was as follows: 2 percent, railroad; 13 percent, trucking; 16 percent, logistics; 22 percent, passenger ground; 29 percent, shipping; and 18 percent, passenger air.

The biggest deal of the second quarter, according to PwC, was a pending $1.3 billion acquisition of Edinburgh Airport in Scotland by Global Infrastructure Partners LLC, a joint venture between Credit Suisse and General Electric. And the second largest deal of the quarter was a $1.2 billion merger between the National Shipping Company of Saudi Arabia and Vela International Marine.  

“There was not anything too terribly surprising with what we saw in the second quarter,” said Jonathan Kletzel, U.S. transportation and logistics advisory leader for PwC, in an interview. “There is definitely still a slowdown in Europe, while things are relatively steady in the U.S. and there appears to be a pickup in investments in the emerging markets. These are things which were largely expected.”

Even with concerns regarding the durability of the economic expansion in the U.S., fiscal issues in Europe, and a deceleration in growth in some key emerging markets that are creating barriers, the report noted that there are myriad potential drivers for future M&A activity.

When asked about some of these specific drivers, Kletzel pointed to how many companies have kept capital on the sidelines during the recession, and M&A activity serves as a solid investment for growth and service expansion by acquiring companies that have maximized their growth potential or are experiencing financial difficulties.

On a geographical basis, South America had a strong second quarter with seven deals valued at $3.4 billion, and the 12 U.S.-based deals came in at $3.8 billion.

While the overall transportation and logistics M&A market is on an upward trajectory, Kletzel said it is at the same time by no means to setbacks like economic turmoil, political issues in the Middle East, and the European economy, among others.