Total deal value in the transportation and logistics industry for the quarter dropped 38 percent despite deal volume growing 26 percent percent compared with the same 2016 period, according to a new report from PricewaterhouseCoopers.
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Total transportation and logistics M&A deal value plunged 38 percent year-over-year to $18.2 billion in Q1 2017, according to a new report from PwC.
Merger and acquisition activity in the transportation and logistics sector slowed considerably in the first quarter of 2017 despite more deals getting done, according to a quarterly analysis of global M&A activity in the sector by multinational professional services and consulting firm PricewaterhouseCoopers (PwC).
Total deal value for mergers and acquisitions in the sector dropped 38 percent to $18.2 billion, even as the number of deals jumped 26 percent to 63 transactions compared with the first quarter of 2016.
On a sequential basis, however, deal value was up 2 percent, but volume slipped 9 percent from fourth quarter 2016.
According to the firm’s latest Insights report, M&A transaction value in the last two quarters has been at its lowest level in the past three years.
“The second half of 2015 and the first half of 2016 was a period of heightened deal activity in the Trucking and Logistics sectors (excl. Asia) and much of the recent softening is attributable to decreased activity in these areas,” said Darach Chapman, PwC U.S. transportation and logistics deals leader and co-author of the report. “This overall decline has been accompanied by a reduction in megadeals, a decline in average deal value, and a reduction in participation by financial buyers in the sector.”
Although the passenger air and shipping sectors lead the activity in the first quarter, accounting for nearly 50 percent of total deal activity, globalization continued to be the driving force behind M&A in transportation and logistics, the report said, pointing to the mega-merger of U.S.-based trucking carriers Swift Transportation and Knight Transportation, which created a combined company worth an estimated $5 billion.
Megadeals – transactions valued at over $1 billion – were a major factor in deal value again this quarter, making up 27 percent of total deal value. A total of 3 megadeals took place in the T&L sector in Q1 2017, down from four in Q1 2016, but up from two last quarter.
Although not generally known for blockbuster M&A activity due to the high level of consolidation among North American operators, the largest deal of the quarter, Infraestructura y Transportes $2.1 billion purchase of Florida East Coast Railway, came from the rail industry, according to the report.
Looking ahead to the remainder of 2017, Chapman said PwC is projecting e-commerce growth and “disruptive technologies to continue to spark investing activity in the sector, such as the recent investment by DB Schenker in the online freight booking platform uShip Inc., creating a partnership between the technology start-up and one of the industry’s oldest logistics providers…In summary, while the sector is currently experiencing something of a slowdown in deal activity, we believe several factors point to a rebound later in the year.”