Increased Activity in M&A Deals Suggests a Logistics Recovery

The merger and acquisition (M&A) environment provides reason for continued optimism in the global transportation and logistics sector, as the number of deals and pace of deal value in Q2 2010 indicate an ongoing recovery in the industry, according to a recent study from PricewaterhouseCoopers LLP.

In the second quarter of 2010, overall deal activity in the transportation and logistics sector was strong, and the pace of quarterly deal activity generally remained above the post-bubble lows of 2009. In Q2 2010 there were 29 announced deals, a quarterly total that far exceeds the pace of 2009. However, the total announced deal value of $13.1 billion in Q2 2010 somewhat lags 2009, which was skewed upward by a major rail transaction.

"The M&A market for U.S. transport and logistics companies demonstrated relative improvement in the second quarter, and as the proportions of total deal volume continue to trend upward, the sector is showing positive signs of recovery," says Kenneth Evans, U.S. transportation and logistics leader for PricewaterhouseCoopers. "However, we look ahead with guarded optimism, as the potential for a double-dip recession remains a risk to future activity."

Additionally, the relative level of minority stake purchases increased during the second quarter compared with the first half of the year. While this may suggest that a sense of risk aversion remains in the transportation and logistics deal market, it is important to note that this trend coincides with an increased level of deal activity by acquirers and targets in Asia. Specifically, companies in China and India were targeted in 34% of deals announced in Q2 2010 compared with 25% of deals announced in 2009.

From a regional perspective, relative interest in Asia and Oceania targets has grown significantly compared with deals targeting entities in other regions. In the second quarter of 2010, Asia and Oceania targets accounted for 69% of deal volume, compared with 49% of deal volume announced in 2009. For targets in all other regions, there was a decline in the proportion of deal volume during this time period, with the exception of North America, which also accounted for significant deal value by acquirer region based on its involvement in two mega deals announced during Q2 2010.

"We're seeing greater involvement from targets in Asia and Oceania, a trend that's primarily being driven by an increase in local-market transactions within China and India. This is further supported by higher economic and traffic growth rates in many nations within the Asia and Oceania region," says Klaus-Dieter Ruske, global transportation and logistics leader for PricewaterhouseCoopers. "As we look ahead, this relatively high level of economic activity should continue to encourage deal making by parties in this region."