PwC forecasts “robust” motor carrier deal making

PwC forecasts “robust” motor carrier deal making

Merger and acquisition (M&A) activity in the transportation and logistics industry increased during the third quarter this year vs. the same stretch in 2013, according to data tracking by global consulting firm PricewaterhouseCoopers (PwC) – with much of that activity occurring amongst trucking companies, particularly in the TL sector.

The environment for trucking is improving which makes some of these deals more attractive,” Jonathan Kletzel, PwC’s transportation & logistics leader, told Fleet Owner. “In many cases a rationale for M&A can be made based upon higher growth and profit potential.”

In the third quarter, PwC tallied up 48 transportation and logistics transactions worth $50 million or more worldwide with a total value of $13.6 billion, compared to 44 deals totaling $12.1 billion during the same period in 2013.

Deal value and volume decreased on a sequential basis compared to the 52 transactions worth $20.6 billion in the second quarter this year, largely due to what Kletzel described as a “lull” in infrastructure deals, which accounted for the majority of so-called “mega deals” in 2013.

That lack of mega deal activity, combined with the interest in trucking M&A – which tends to carry lower valuations – contributed to a lower average deal value of $283 million in the third quarter this year, he said.

“If a rebound in infrastructure deals is delayed, we could see the weakness in deal values persist into 2015,” Kletzel explained. “However there would still likely be a robust volume of announcements in trucking and shipping.”

He said PwC foresees “a variety of motivations” driving more trucking deal making. “In some cases these deals have primarily achieved the broadening of service portfolios into new logistics offerings,” Kletzel noted.

Overall, trucking and logistics-focused deals continued to increase, with the two modes combined representing more than 40% of M&A activity in the third quarter this year.

“In particular, the North American trucking M&A market is robust with companies looking to improve geographic reach, expand TL businesses, enhance logistics offerings and add new capacity as freight demand improves,” Kletzel said.

PwC also expects to see the return of larger infrastructure deals to the market on a global basis, which could result in higher deal values in the coming quarters.

“Construction budgets are under pressure in many developed countries due to broad fiscal constraints,” Kletzel indicated. “However, the U.S. has historically been more conservative in privatizations of infrastructure, so it is most likely that the rebound will be primarily driven by deals in other countries.”

On a regional basis, Asia and Oceania [The Pacific Ocean region] accounted for more than 41% of global transportation and logistics-focused deal volume in the third quarter, followed by North America with 33%, and the U.K. and Eurozone with 18%. Local market deals continue to represent the majority of activity with 31 transactions or nearly 65% of activity, PwC noted.

“While overall deal valuations remain high, the substantial cash levels of strategic investors should be enough to finance new M&A,” Kletzel added. “Accordingly, we are optimistic about the health of the transportation and logistics deal market as we enter the final quarter of 2014.”

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