Transportation Deal Makers Thinking More Local than Larger
Merger and acquisition (M&A) volume in the transportation and logistics industry increased slightly in the third quarter of 2013 compared to the previous quarter as dealmakers in the sector focused on local market consolidation, according to PwCUS.
There were 40 transportation and logistics transactions worth $50 million or more totaling $10.2 billion in the third quarter of 2013, compared to 37 deals representing $16.3 billion in the second quarter of 2013. While M&A volume increased slightly on a sequential basis, total deal value remained anemic, leading to the weakest quarterly average deal size ($256 million) of the past four years. On a year-over- year basis, deal volume and value decreased compared to 42 transactions totaling $19.5 billion in the third quarter of 2012.
“Smaller, local market deals led activity in this quarter; we didn’t see as many large transformative deals that would typically contribute to higher overall value,” said Jonathan Kletzel, U.S. transportation and logistics leader for PwC. “However, with a number of quality assets expected to come to market, we may see the return of large infrastructure deal activity through the end of this year and into early 2014, which could drive a rebound in M&A values.”
Strategic buyers continued to lead in deal activity in the third quarter of 2013, representing 75 percent of deal volume. The modest financial investment in the market remained skewed toward smaller shipping deals, including minority stakes in port services. “Despite their attenuated role in the overall deal market, financial investors have been paying relatively high valuations for their recent announcements, and have thus contributed to an overall rise in valuation for transportation M&A,” noted Kletzel.
Regionally, Asia & Oceania continued to lead in both deal value and volume, but the sector also saw an uptick in United States deal volume, driven by local market trucking and passenger air deals. U.S. volume recorded a particularly robust pace in the third quarter, while Eurozone is heading toward one of the lowest annual totals in the last ten years. Given the historical cyclicality of transportation M&A, this disparity could be the result of a generally stronger economic recovery in the U.S. compared to other large developed nations.
“While M&A continues to be an important component toward achieving strategic growth, transportation dealmakers are tending to view the current market with a high degree of caution and in turn, focusing on smaller, local-market acquisitions that are easier to integrate. However, they are clearly willing to pay higher valuations for the ‘right deal.’ The key to being able to execute when a good potential acquisition comes to market is to act with discipline, speed and unbiased thoroughness,” concluded Kletzel.
