Although activity increased from the first quarter, total deal volume and value in the transportation and logistics sector was still down 18 percent and 22 percent year-over-year, respectively, according to a new report from PricewaterhouseCoopers.
Merger and acquisition activity in the transportation and logistics industry saw strong growth in the second quarter of 2016 compared with the previous quarter, according to a quarterly analysis of global deal activity in the sector by multinational professional services and consulting firm PricewaterhouseCoopers.
Sequentially, total deal value for mergers and acquisitions in the sector grew 20 percent to $34 billion compared with first quarter 2016 as the number of deals increased 6 percent, from 48 in Q1 2016 to 51 in Q2 2016.
Compared with the same period in 2015, however, deal volume and total value were down 18 percent and 22 percent, respectively.
PwC noted in its latest Insights report, the M&A activity reported in the transportation and logistics sector during the second quarter represented the third highest quarter by aggregate value in the last three years.
Although deal volume was slightly below the average of recent quarters, this was more than offset by an average deal value of almost $670 million, over 25 percent higher than that of the last three years, the firm said. The uptick in activity was diversified across subsectors, with aggregate value increasing in the logistics, trucking, passenger ground and passenger air industries.
Deal value in the trucking subsector was up 69 percent year-over-year in Q2 2016, driven primarily by Maanshan Dingtai Rare Earth & New Materials Co.’s massive $16.83 billion acquisition of SF Holding (Group) Co. Logistics was the second largest subsector with a deal value of $5.8 billion for the quarter, but was still down 26 percent compared with the same 2015 period. Despite a steep decline from last year, the shipping subsector saw the third largest aggregate deal value in Q2 2016 at $923 million.
PwC said there were five “megadeals” – those with a value over $1 billion – during the second quarter with a total aggregated disclosed value of $26.7 billion, including the SF Holding deal, the largest of the five. At $4.2 billion, Alaska Airline’s purchase of Virgin America was the second largest transaction this quarter.
Looking ahead, the authors of the report see a strong positive outlook for M&A activity in the transportation and logistics sector.
“Following a relatively soft Q1, Q2 2016 has signaled a significant pickup in T&L deal activity underpinned by two key themes: The diversification of M&A activity across the subsectors and the sustained M&A activity in Asia and China in particular,” they wrote.
“Logistics and Trucking, which have driven much of the activity over the past several quarters, have been supplemented by significant deals in the Passenger Air and Ground space such as the acquisition of Virgin America in the US, Asia Aviation in Thailand and Autopista Arco Norte SA de CV, a toll road operator in Mexico.
“In China, with the middle class soaring and transportation costs declining, increased e-commerce activity has been leading companies like SF Holding to seek access to capital and increased scale,” they added. “A lengthy IPO approval process has driven SF Holding and other transportation companies to seek ‘backdoor listings’ (often reverse mergers with public companies) in order to raise capital to support future M&A.”
In addition, the report noted several other factors that could continue to driver further deal activity in the near term. These factors included a “strong positive outlook for global M&A activity across all sectors, continuing an upward five-year trend of consistent growth and steady recovery in the U.S.; the continued drive by corporations to outsource logistics as it becomes a more specialized and technology-driven function; the continued expansion of e-commerce and the demand it creates for investment in the Logistics sector; and globalization and the expansion of world trade [that] will create the need for advances in technology and growth in the Transportation and Logistics sector.”
PwC’s Global Transportation and Logistics M&A Deals Insights analysis is compiled using transaction data from Thomson Reuters.
PwC: Trucking, logistics firms jumpstart M&A activity in Q2 2016
