PwC: Logistics M&A activity slows in Q1 2016

Although activity slowed in the first quarter, total deal value for mergers and acquisitions in the transportation and logistics sector was still up 26 percent compared to first quarter 2015, according to a new report from PricewaterhouseCoopers.    Merger and acquisition activity in the transportation and logistics industry slowed in the first 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.
   Although activity slowed sequentially in the first quarter, total deal value for mergers and acquisitions in the sector still grew 26 percent to $37.6 billion compared with first quarter 2015. The number of mergers and acquisitions, however, fell from 56 in Q1 2015 to 48 in Q1 2016.
   As a result of substantial deal value in the fourth quarter of 2015, average deal value in the first quarter was also down sequentially to less than $784 million. PwC noted that excluding Q4 2015, first-quarter average deal value was the highest in three years.
   In its latest Intersections report, PwC attributed the year-over-year increase in deal value in part to continued strong “megadeal” – those with a value over $1 billion – activity during the quarter. Data from the report indicates there were five such deals announced in the first quarter with a total value of nearly $28 billion.
   PwC said the largest of the five megadeals was the China-based Vanke Co Ltd.’s announcement it would acquire the assets of state-owned Shenzhen Metro Group Co Ltd. for an estimated $9.2 billion. 
   “Despite a slight slowing of the growth of the global economy, it does continue to grow, driving the need for continued transportation and logistics services,” report authors Jonathan Kletzel and Julian Smith said. “Rather than taking a long-term organic growth-driven strategy, a number of T&L companies continue to drive growth through inorganic means.
   “Growth by means of mergers or acquisitions continue to be popular,” they added. “While we saw a decline in value compared to the fourth-quarter 2015, it should be noted that the first quarter of 2016 was the second-most active on the basis of average transaction value in the last three years.
   “Continued lows in the cost of crude oil continues to drive lower costs in the sector, freeing up funds for continued capital spending, including acquisitions. In the current environment, T&L companies are also working to cope with competition and growing investment demands. These two factors are expected to continue driving increased financial and strategic investments at least in the near-term. On the basis of the aforementioned factors, we expect the deal environment to maintain momentum and look forward to a strong M&A environment in the coming months.”
   PwC’s Intersections transportation and logistics M&A analysis is compiled using transaction data from Thomson Reuters.