TORONTO, Ont. — A new report by PricewaterhouseCoopers suggests transportation merger and acquisition activity has slowed drastically in the first quarter of 2009.
The report also shows the value of the average deal has plummeted from US$513 million in 2008 to US$159 million in the first quarter of 09. A total of 18 deals were announced during the first quarter down from 43 in the fourth quarter of 2008, according to the report.
“The continued slowdown of merger and acquisition activity for the Global transportation and logistics sector during the first quarter of 2009 presented interesting changes in behaviour among deal participants,” said Todd Thornton, Canadian T&L sector leader at PwC in Canada. “Most notable is the shift toward minority stake purchases, which can be attributed to tight credit and strategic buyers’ aversion to risk. We expect these factors will lead to minority stake purchases continuing to make up a large percentage of deals announced during the rest of the year.”
“Canadian M&A activity during the first quarter of 2009 was no different then what we saw globally”, Thornton added. “While activity is down, we did see some action in the various sectors. CargoJet Airways’ acquired the remaining 49% interest in Prince Edward Air Ltd. In trucking, we saw purchases by a strategic investor and in rail, Canadian National (CN) Railway sold to GO Transit, the Toronto area commuter rail agency, CN’s Weston division for expanded GO service between Union Station and the regions northwest of the city.”
Most deals were completed by strategic investors, according to the report, Intersections: First quarter 2009 mergers and acquisitions analysis.
Large deals, valued at more than US$1 billion were non-existent in the first quarter whereas 22 “large deals” took place in 2008 and 17 in 07. The report chalks this up to a “focus on capital preservation by potential buyers.”
“While the overall number of deals was drastically reduced during the first quarter, deal activity in the transportation and logistics industry as a whole can nonetheless be considered robust, especially when compared with this sector’s activity over the past 20 years,” said Klaus-Dieter Ruske, global T&L sector leader, PricewaterhouseCoopers. “While this is a positive sign, we believe that financing and overall economic sentiment will continue to discourage a rebound in T&L deal activity. Moving forward, we will likely see M&A activity driven by need because a significant increase in deal activity will likely not occur until we see substantial recovery in economies around the globe.”
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