2015 has been a big year for mergers and acquisitions in the transportation and logistics industry, and roll-up powerhouse XPO Logistics is by no means the only well-known company getting in on the action.
In fact, through the first three quarters of the year, 2015 is shaping up to have the highest value of mergers and acquisitions in this industry since 2006, according to a quarterly analysis of global deal activity in the sector from PwC US, a subsidiary of professional services and consulting firm PricewaterhouseCoopers.
In the third quarter of 2015 alone, there were 44 M&A transactions worth $50 million or more with a combined value of $28.8 billion, a 30 percent drop in volume and 27 percent decline in value compared to the previous quarter, but a 36 percent jump in value compared with the third quarter of 2014.
Total deal value for all mergers and acquisitions in the transportation and logistics sector is up 40 percent year-over-year in the first three quarters of 2015, according to the PwC US Intersections report, which is compiled using transaction data from Thomson Reuters.
Data from the report indicates there have been 846 total transactions through the first three quarters of 2015, not including passenger transportation-related acquisitions, compared to 1,203 deals the previous year. Despite the 29.7 percent decline in volume, those deals increased in both average value and overall value, year-over-year, from $55.7 million to $90.48 million and from $66.98 billion to $76.55 billion, respectively.
The report said there were a total of six megadeals, which PwC US classifies as transactions valued at over $1 billion, worth a combined $18.3 billion in the third quarter of 2015, down from nine megadeals worth $23.6 billion in the second quarter. Megadeals still accounted for 63 percent of the total quarterly deal value, however, driven primarily by companies attempting to increase scale, enhance operations, build transportation networks and expand geographic reach.
Singapore-based Global Logistics Properties’ $4.55 billion acquisition of Industrial Income Trust’s U.S. logistics portfolio, for example, will make GLP the second largest logistics property owner and operator in the country. Other third quarter megadeals included UPS’s $1.8 billion acquisition of Chicago-based freight brokerage Coyote Logistics, and the purchase of LeasePlan, a global leader in fleet management headquartered in the Netherlands, by the financial investor LB Group for over $4 billion.
Year-to-date M&A activity was led by the trucking and logistics industries, which accounted for nearly three quarters of total non-passenger deal volume at 37.9 percent and 33.7 percent, respectively, according to PwC US. The firm noted activity by financial investors, such as the LeasePlan-LB Group deal, increased to almost 48 percent of all mergers and acquisition in the third quarter of 2015, compared with 44 percent during the second quarter of 2015, as investors continued to expand their transportation and logistics portfolios.
Prior to the third quarter, several large deals were announced, including FedEx Corp.’s $4.8 billion offer for the Netherlands-based express carrier TNT Express, an acquisition that’s expected to make FedEx the largest package delivery provider in Europe, and the integrator’s $1.4 billion acquisition of third-party logistics provider GENCO; Japan Post’s $5.1 billion offer for Toll Holdings, Australia’s largest freight transportation company; and struggling 3PL UTi Worldwide’s sale to Danish supply chain specialist DSV for $1.35 billion. Also in 2015, Echo Global Logistics bought fellow Chicago-based freight broker Command Transportation for $420 million and Swiss 3PL Kuehne + Nagel Group acquired Memphis, Tenn.-based ReTrans Inc. for an undisclosed amount.
Following the merger of Hamburg-based Hapag-Lloyd and Chile’s CSAV in December 2014, M&A has been relatively quiet in the ocean liner industry, but that could quickly change as the year goes on. Marine shipping deals increased significantly as a portion of overall transaction volume in the third quarter, accounting for 34 percent of deals compared to 13 percent in the second quarter, and although PwC US said those deals “tended to be smaller, bolt-on acquisitions,” two megadeals could potentially be announced in the fourth quarter.
Container carrier APL’s parent company Neptune Orient Lines, which sold its APL Logistics business to Japan’s Kintetsu World Express for $1.2 billion back in May, recently confirmed it has entered into separate discussions with both Danish shipping giant Maersk and CMA CGM of France about a possible acquisition of NOL.
COSCO and China Shipping also confirmed a widely-rumored merger between the Chinese ocean carriers during meetings with U.S. Federal Maritime Commissioner William P. Doyle in November. COSCO and CSCL suspended trading of their stocks Aug. 10, but said little about their plans until Doyle said the state-owned shipping companies told him during a recent visit to Shanghai they “are in the beginning stages of a merger.”
Looking forward to the rest of 2015, PwC said it remains “optimistic” that M&A activity will continue to increase in the fourth quarter.
“Following a strong start to the first half of the year, transportation and logistics deal activity tapered off slightly during the third quarter, though we are expected to still be on track to have a successful year for deal activity in the sector,” said Jonathan Kletzel, U.S. transportation and logistics leader for PwC and coauthor of the report.
“Historically, the fourth quarter has been a popular time for M&A activity as strategic investors prepare for the next year’s operations, and we believe the M&A environment will likely see increased activity. At the same time, in order to capitalize on growth, transportation executives remain focused on strengthening their core business operations and expanding in high growth markets,” he added.
This article was published in the December 2015 issue of American Shipper.