Transportation and logistics M&A activity drastically slows in first quarter 2009, finds PwC



    Average deal values decline from US$513 million to US$159 million

    TORONTO, June 1 /CNW/ - Deal activity dropped significantly during first
quarter 2009 in the global transportation and logistics (T&L) industry,
according to a report released today by PricewaterhouseCoopers LLP (PwC):
Intersections: First-quarter 2009 mergers and acquisitions analysis.

    
    -   Eighteen deals were announced at a disclosed value of at least
        US$50 million each, down from 43 such deals in fourth quarter 2008.
    -   Activity continued to increase among non-US parties which made up 94%
        of deal volume for T&L targets in the first quarter, up from 71% in
        2007 and 81% in 2008.
    -   Average deal values declined significantly, from US$513 million in
        2008 to US$159 million in first quarter 2009 (for deals with a value
        of at least US$50 million).
    -   In place of large deals worth at least US$1 billion were minority
        stake purchases, accounting for 39% of deals, up from 30% of the
        total deals announced in 2008.
    

    "The continued slowdown of M&A activity for the Global T&L 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 said. "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."
    Intersections reports that passenger air and logistics sectors globally
saw the most deal activity in value during first quarter 2009, a change from
past years when shipping took the lead. Passenger air accounted for 34% of M&A
activity, compared with 17% in 2008 and 27% in 2007. Deal activity for
logistics targets also increased over previous years, accounting for 32% of
activity during first quarter 2009 compared with 13% in 2008 and 14% in 2007.
    Strategic investors continued to account for the majority of deals for
the T&L industry, as previously predicted by earlier editions of
Intersections. Strategic investors accounted for more than 80% (15 deals) for
first quarter 2009, up from approximately 60% of deals announced in 2007 and
2008. There was an overall absence of deals in the shipping sector by
financial investors during the first quarter. In previous quarters, financial
investors have shown more interest in shipping than other transportation
modes.
    The pace of deal activity, as measured by the number of deals announced
for T&L targets, has declined significantly, with just 18 deals in first
quarter 2009. Large deals (with a disclosed value of US$1 billion or more)
were nonexistent for the T&L sector during the first quarter. This marks a
huge drop from the 22 large deals announced in 2008 and 17 in 2007. A focus on
capital preservation by potential buyers contributed to the absence of large
deal activity. The difficult financing environment witnessed in 2009 has
caused well-capitalized strategic buyers to engage in smaller deals, including
minority stakes, divested assets, and distressed targets. It is likely that
this trend will continue, with a general lack of large deals being made in the
T&L sector throughout 2009 and possibly beyond.
    T&L deals shifted tremendously during first quarter 2009 away from North
America, with acquirer and target parties focused heavily in the United
Kingdom-Eurozone and Asia-Oceania regions. Deals in these regions were up to
nearly 80%, in comparison with 55% in 2007. A decline in activity in South
America was due to a reduction in deals for Brazilian targets, which had been
a primary contributor to regional deals in past quarters. BRIC (Brazil,
Russia, India, and China) targets' deal activity consisted of two deals in
Brazil and one deal in China during the first quarter.
    Local-market deals in all nations increased to 80% during first quarter
2009, compared with approximately 60% in 2007 and 2008, showing that the
predicted trend of globalization leading to increased cross-border
consolidation did not hold true. This is likely attributable to a preference
by the buyers to build scale in their own markets versus expansion into new
geographies during this difficult operating environment for T&L companies.
    "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."
    This edition of Intersections includes commentary on the privatization of
infrastructure, which discusses the future of global and U.S. transportation
infrastructure privatization deals with a heavy focus on the United States.
    Additionally, this issue of Intersections contains a special report, "T&L
companies find auto woes are contagious," which includes executive commentary
on the effect of the current auto industry restructuring and its impact on the
global transportation and logistics sector. For information and to access the
full report, visit www.pwc.com/transport.

    About PricewaterhouseCoopers LLP

    PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance,
tax and advisory services to build public trust and enhance value for its
clients and their stakeholders. More than 155,000 people in 153 countries
across our network share their thinking, experience and solutions to develop
fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP
(www.pwc.com/ca) and its related entities have more than 5,200 partners and
staff in offices across the country.
    "PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP, an Ontario
limited liability partnership, or, as the context requires, the
PricewaterhouseCoopers global network or other member firms of the network,
each of which is a separate and independent legal entity.





For further information:

For further information: Kiran Chauhan, (416) 947-8983,
kiran.chauhan@ca.pwc.com; Carolyn Forest, (416) 814-5730,
carolyn.forest@ca.pwc.com

Organization Profile

PwC

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890