Transportation, Logistics M&A Deal Volume Still High in 2007

Dec. 3, 2007
Global environment will continue to cause consolidation in industry.

According to a new report from PricewaterhouseCoopers, total transportation and logistics deal volume for 2007 is on pace to exceed 2006 levels. The firm believes this may be due in part to the effects of the decline in debt market liquidity and stock market volatility felt by financial investors.

Total deal value during the first three quarters of 2007 exceeded the total deal value announced during the comparable period in 2006 ($39 billion versus $27 billion, respectively), though it is not on pace to exceed the total deal value announced for all of 2006.

"The pace of M&A activity in the transportation and logistics industry has not abated, and we anticipate that it is going to continue as a result of the current global environment," said Ken Evans, U.S. transportation and logistics sector leader, PricewaterhouseCoopers. "The number of deals, both large and small, has been significant this year. This kind of consolidation within the industry creates more opportunities for companies to offer a full range of transport services to their customers."

In 2006, passenger air targets accounted for the largest percentage of announced deal value, but upon closer inspection, this number is slightly skewed by the large passenger air acquisition deals that were withdrawn. In the third quarter of 2006, the announced deal value associated with passenger air targets declined in favor of rail targets, and in Q1 2007-Q3 2007, it declined in favor of trucking targets. Meanwhile, the shipping markets continue to be strong, particularly in the bulk cargo segment, fueled by high rates and high stock prices.

Due to a notable increase in investor pressure and the open skies agreement between the U.S., PricewaterhouseCoopers predicts a continued likelihood of global air carrier mergers and acquisitions.

Based on value, U.S. firms have been leading acquisition targets for M&A deals worth more than $50 million in 2006 and the first three quarters of 2007, while Asia Pacific target value declined from 2006 compared to the first three quarters of 2007 due to the announcement of several large deals targeting Australian companies in 2006.

Western Europe led in 2006 and the first three quarters of 2007 in volume of deals worth more than $50 million, with the U.S. not far behind. While the continued decline of the U.S. dollar makes foreign acquisition of U.S. companies less expensive, there has not been a dramatic increase in the volume of deals in the U.S. Additionally, the 2007 volume of transportation deals for Brazil, Russia, India and China (BRIC) targets is slated to equal 2006 volume, driven by an increase in deals targeting Russian and Indian companies, having already exceeded 2006 levels.

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