NEW YORK, NY -- Deal flows in the transportation and logistics industry were robust during the second quarter of 2012, driven by mega deals in the transportation infrastructure sector, according to Intersections, a quarterly analysis of global merger and acquisition (M&A) activity in the transportation and logistics industry by PwC US.
In the second quarter of 2012, there were 45 announced transportation and logistics transactions worth $50 million or more, totaling $12.6 billion, a slight decrease compared to 46 deals worth $13.4 billion in the second quarter of 2011. However, the pace of deal volume increased 29 percent from the first quarter of 2012, which saw 35 transactions. Average deal value remained flat at $281 million in the second quarter of 2012, compared to the same three month period in 2011.
The transportation and logistics market was particularly active in larger deals in the second quarter of 2012, and less so in smaller/undisclosed deals. The pace of mega deals, or deals with a disclosed value of at least $1 billion, continued to exceed that of 2011. With three mega deals announced in the second quarter of 2012 totaling $3.7 billion, the number of mega deals announced in the first half almost reached the level of the total mega deals in all of 2011.
“Our report shows that M&A activity increased in the second quarter of 2012 in terms of number of deals and total deal value as cash levels remained high among the largest companies in the sector. While concerns over the durability of the economic expansion in the U.S., ongoing turmoil in Europe, and decelerating growth in key emerging markets are creating barriers, there are a multitude of potential drivers for future M&A,” said Jonathan Kletzel, U.S. transportation and logistics advisory leader for PwC.
On a regional basis, deal activity in South America continues to increase with seven local and inbound deals valued at $3.4 billion in the second quarter of 2012, fueled by infrastructure transactions in Brazil and, to a lesser extent, Chile. While the U.S. had 12 transactions worth $3.8 billion, the pace of overall North American deals did not change significantly during the second quarter. However, the region provides an interesting contrast with South America, as there are fewer infrastructure deals involving North American companies, with M&A primarily focused on logistics, trucking and shipping targets.
European deal flow in the second quarter was down potentially due to uncertainty in the region resulting in a more conservative approach to M&A in the sector. While the Eurozone issues may continue to weigh on activity in this region, European activity could see a boost from the ongoing privatizations of transportation companies in Russia. Additionally, there was a decline in deals involving parties in China — primarily among airlines and expressway operators — which contributed to a slight decline in totals for the Asia and Oceania region.
The overall level of cross-border/local-market activity is on par with activity seen in 2011 with 14 cross-border deals and 31 local market transactions in the second quarter of 2012. “This masks a subtle trend – advanced economy acquirers are engaging in more cross-border deals while emerging and developing economy acquirers are focusing on their local markets,” added Klaus-Dieter Ruske, global transportation and logistics leader for PwC. “This trend may continue as many advanced market investors look for higher returns to supplement relatively sluggish organic growth opportunities. In addition, the high level of liquidity could encourage more cross-border M&A by U.S. companies.”
Transportation infrastructure continued to grow, with the sector accounting for two of the three mega deals totaling $2.5 billion in the second quarter of 2012. As part of that trend, road and airport concessions accounted for some of the largest deals in the sector, given the size of these assets, and could remain the primary driver of deal value in the sector during the second half of the year.
“Shipping consolidation could also help address vessel overcapacity issues and financially weak competitors, though these are not as likely to represent the larger deals in the sector due to the relative size of many of the target entities,” added Kletzel.
For information on Intersections and to access the full Q2 2012 report, visit: http://www.pwc.com/us/industrialproducts