PwC: Logistics M&A activity ‘remains strong’ despite Q3 decline

Total deal value and volume in the transportation and logistics industry in third quarter 2016 fell 30 percent and 11 percent, respectively, from the previous quarter, according to a new report from PricewaterhouseCoopers.    Merger and acquisition activity in the transportation and logistics industry remained “strong” in the third quarter of 2016 despite declining from the previous quarter and third quarter 2015, according to a quarterly analysis of global deal activity in the sector by multinational professional services and consulting firm PricewaterhouseCoopers (PwC).
   Sequentially, total deal value for mergers and acquisitions in the sector plunged 30 percent to $26 billion compared with second quarter 2016 as the number of deals was relatively stable, slipping from 51 in Q2 2016 to 50 in Q3 2016.
   Compared with the same period in 2015, however, deal value was down just 5 percent and volume 11 percent.
   PwC noted in its previous report, however, 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.
   According to the latest Insights report, although deal volume was stable in the shipping sector during Q3 2016 compared with the previous quarter, the segment led all categories in deal value, driven primarily the Lonsdale Consortium’s $7.3 billion acquisition of Port of Melbourne Corp. in September – the largest deal in the T&L sector this quarter.
   By comparison, second quarter 2016 saw five megadeals take place with a total value of $26.7 billion.
   Deal value and volume in the rail subsector recorded modest increases from Q2 2016, but the basis for comparison was relatively low last quarter, the firm noted.
   The logistics category saw third quarter deal volume jump 20 percent and value more than triple to $4.8 billion compared with the same 2015 period, but it still wasn’t enough to match the levels seen in second quarter 2016.
   “Asia and Australia dominated M&A in the Transportation and Logistics sector in Q3 of 2016, largely driven by infrastructure concessions and participants seeking access to capital,” said PwC U.S. Transportation and Logistics Deals Leader Darach Chapman and co-author of the report.
   Looking ahead, the firm said it continues to see the outlook for M&A activity in the transportation and logistics sector as strongly positive.
   “While long-term strategic deals, such as infrastructure concessions, continue to get completed, the overall T&L sector experienced a slowdown in M&A activity in the most recent quarter,” PwC said. “This softness, particularly evident in the decline in cross- border and strategic deals, is likely attributable to the current economic uncertainty, in particular around the US presidential elections and the long-term impacts of Brexit.
   “We believe that underlying fundamentals in the industry – a drive to globalization, corporate outsourcing of the logistics function, the continued global growth in e-commerce and the fragmented nature of some of the key subsectors – will continue to drive growth and associated M&A activity,” it added. “Further, we expect Asia to continue to be a strong contributor to this M&A activity, as consolidation of the sector continues in many countries in the region and companies continue to seek access to the capital markets that help them capture these opportunities.”
   PwC’s Insights analysis is compiled using transaction data from Thomson Reuters.