Mergers and acquisitions in the transportation and logistics sector in the first six months of the year, which have included several multi-billion dollar deals, are off to the hottest start in seven years, according to a new report from PwC US.
Merger and acquisition activity in the transportation and logistics industry increased substantially in terms of both volume and value in the first half of 2015 compared to the first half of 2014, according to a quarterly analysis of global deal activity in the sector by PwC US, a subsidiary of multinational professional services and consulting firm PricewaterhouseCoopers.
Data from the PwC US report Intersections indicates there were 61 announced transactions (worth $50 million or more) in the second quarter of 2015 and 116 deals in the first half, compared to 59 and 101 transactions in the same 2014 periods. Those deals increased in overall value year-over-year as well, from $29.6 billion to $34.4 billion and from $40.8 billion to $64 billion, respectively, in the second quarter and first half of the year.
The report said there were a total of nine megadeals, which it classifies as transactions valued at over $1 billion, worth a combined $23.6 billion in the second quarter alone, accounting for 69 percent of the total quarterly deal value.
The largest of these deals was FedEx Corp.’s $4.8 billion offer in April to purchase 100 percent of Netherlands-based express carrier TNT Express, an acquisition that is expected to make FedEx the largest package delivery provider in Europe. Other megadeals included U.S.-based XPO Logistics’ $3.5 billion purchase of a 67 percent interest in Groupe Norbert Dentressangle, an iconic French trucking provider, in June.
Second quarter M&A activity was led by the trucking and logistics industries, which accounted for more than half of all deal volume at 28 percent and 23 percent, respectively, according to PwC.
Prior to the second quarter, Japan Post in February offered A$6.5 billion (U.S. $5.1 billion) to acquire Toll Holdings, Australia’s largest freight transportation company, which engages in freight forwarding, contract logistics, express delivery, intermodal rail and trucking. United Parcel Service Inc.’s $1.8 billion acquisition of Chicago-based freight brokerage Coyote Logistics will be included in the firm’s third quarter analysis as it was not announced until late last week, well after the June 30 cutoff.
“The first half of the year proved to be strong year for M&A activity in the transportation and logistics industry and deal value in the second quarter was the highest it has been in seven years,” said Jonathan Kletzel, U.S. transportation and logistics leader for PwC. “Cross-border and service line expansion were key themes that drove the rationale for deals in the second quarter, particularly in advanced economies. We expect cross-border activity to continue through the end of the year as businesses look to gain access in new markets and the strong dollar gives investors opportunities for outbound deals.”
Looking forward, the firm said it remains “optimistic” that M&A activity will continue to increased in the remainder of 2015.
“As a key driver, the US economy remains strong and the US dollar continues to advance against the euro, the yen, the pound, and many other currencies,” said PwC US. “This makes cross-border acquisitions by US companies cheaper, on a relative basis. Concurrently, emerging economies see continued GDP growth driven by a growing middle class and rapidly urbanizing populations. Companies in these markets see the need for increased efficiencies and scope, which can be achieved through inorganic means.
“Finally, fuel prices remain low,” added PwC. “The Energy Information Agency predicts that gasoline prices in the US are expected to average $2.33 a gallon, a decline of more than 30 percent compared to 2014. Jet fuel prices have also declined more than 40 percent since July 2014, based on PwC’s analysis. These lower fuel costs make acquisitions more attractive because of lower expenses, which make available additional funds for activities such as M&A.”
PwC US’s Intersections transportation and logistics M&A analysis is compiled using transaction data from Thomson Reuters.
Report: Logistics M&A booming in first half 2015
