Transportation and Logistics: Let's Make a Deal
If it seems that there's a new merger or acquisition announcement daily in the transportation and logistics sector, you're not imagining it. Deal value rose considerably—from $63.1 billion during the first three quarters of 2014 to $97.9 billion during the first nine months of 2015, a 55 percent year-over-year increase. That's according to PwC US' third-quarter analysis of global deal activity in the sector.
During the third quarter of 2015, 44 transactions occurred, resulting in a total value of $28.8 billion, a 27-percent decline when compared to the second quarter's aggregate. And six of these transactions were considered megadeals—valued at $1 billion or more, comprising $18.3 billion of the third quarter total.
"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," says Jonathan Kletzel, PwC's U.S. transportation and logistics leader.
As in previous quarters, cross-border expansion was a primary cause of many transactions, especially in countries with advanced economies, as 55 percent of their transactions involved transnational activity. Strategic investors interested in expanding their operations to ultimately create a global transportation network oversaw 48 percent of all cross-border transactions.
Aside from cross-border expansion and strategic investments, logistics companies continued to influence transportation and logistics activity as well, encompassing 23 percent of all transactions.
"As more companies make the decision to outsource logistics services, and turn to third-party suppliers, efficiencies in scale and geographic reach will become critical drivers of inorganic growth," Kletzel says. "These deals were primarily driven by the need to fill a specific gap, gain scale, or expand margins.
"Also, growing consumer demand, as a result of an improving economy, is leading to increased freight volume, creating a potential opportunity for logistics companies to consolidate," he adds.
The fourth quarter historically has been a popular time for merger and acquisition activity, as strategic investors prepare for the next year's operations. As a result, PwC predicts the mergers and acquisitions environment will likely see increased activity in 2016.