Report: Logistics M&A volume down, value up in 2015

Although activity slowed slightly in Q3, total deal value for mergers and acquisitions in the transportation and logistics sector for the first nine months of 2015 is up 40 percent from the same 2014 period, according to a new report from PwC US.    Merger and acquisition activity in the transportation and logistics industry has decreased in terms of volume, but increased substantially in terms of value in the first nine months of 2015 compared to the same 2014 period, according to a quarterly analysis of global deal activity in the sector by PwC US, a subsidiary of multinational professional services and consulting firm PricewaterhouseCoopers.
   There were 44 M&A transactions worth $50 million or more in the third quarter with a combined value of $28.8 billion, a 30 percent drop in volume and 27 percent decline in value, compared to the previous quarter. Total deal value for all mergers and acquisitions in the transportation and logistics sector, on the other hand, is up 40 percent year-over-year in the first three quarters of 2015.
   Data from the PwC US report Intersections indicates there have been 846 total transactions through the first three quarters of 2015, not including passenger transportation-related acquisitions, compared to 1,203 deals the previous year. Despite the 29.7 percent decline in volume, those deals increased in both average value and overall value year-over-year, from $55.7 million to $90.48 million and from $66.98 billion to $76.55 billion, respectively.
   The report said there were a total of six megadeals, which it classifies as transactions valued at over $1 billion, worth a combined $18.3 in the third quarter of 2015, down from nine megadeals worth $23.6 billion in the second quarter. Megadeals still accounted for 63 percent of the total quarterly deal value, however, driven primarily by companies attempting to increase scale, enhance operations, build transportation networks and expand geographic reach.
   Singapore-based Global Logistics Properties’s $4.55 billion acquisition of Industrial Income Trust’s US logistics portfolio, for example, will make GLP the second largest logistics property owner and operator in the United States. Other megadeals included roll-up powerhouse XPO Logistics’s more than $3 billion acquisition of asset-based trucking and logistics provider Con-way Inc.; the purchase of LeasePlan, a global leader in fleet management headquartered in The Netherlands, by the financial investor LB Group for over $4 billion; and United Parcel Service Inc.’s $1.8 billion acquisition of Chicago-based freight brokerage Coyote Logistics.
   Year-to-date M&A activity was led by the trucking and logistics industries, which accounted for nearly three quarters of total non-passenger deal volume at 37.9 percent and 33.7 percent, respectively, according to PwC. PwC noted activity by financial investors, such as the LeasePlan-LB Group deal, increased to almost 48 percent of all mergers and acquisition in Q3 2015, compared with 44 percent in Q2 2015, as investors continued to expand their transportation and logistics portfolios.
   Prior to the third quarter, several gigantic deals were announced in the logistics and trucking industries, including FedEx Corp.’s $4.8 billion offer for Netherlands-based express carrier TNT Express, an acquisition that is expected to make FedEx the largest package delivery provider in Europe; U.S.-based XPO’s $3.5 billion purchase of a 67 percent interest in Groupe Norbert Dentressangle, an iconic French trucking provider, in June; and Japan Post’s February offer of A$6.5 billion (U.S. $5.1 billion) to acquire Toll Holdings, Australia’s largest freight transportation company.
   “Logistic companies remained a significant driver of T&L activity in the third quarter, and we expect that to continue,” PwC US said in the report. “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. These deals were primarily driven by the need to fill a specific need or gap, gain scale, or expand margins. Also, growing consumer demand as a result of an improving economy and historically low fuel costs are leading to increased freight volume, creating an opportunity for logistics companies to consolidate.
   “Trucking continued to be an active deal-making sector, as smaller ‘mom and pop’ operators decide to cash out, rather than invest in fleets and attempt to find the increasingly scarce driver talent,” added PwC. “There was also a significant increase in marine shipping and related services deals, which drove more than a third of the quarter’s volume, compared to only 13 percent in the second quarter. These deals tended to be smaller, bolt-on acquisitions, as companies attempted to increase efficiencies. Combined, these two segments accounted for almost 60 percent of the quarter’s overall deal volume.”
   Also of note during the quarter, marine shipping and related services deals increased significantly as a portion of overall transaction volume, accounting for 34 percent of third quarter deals compared to 13 percent in the second quarter. “These deals tended to be smaller, bolt-on acquisitions, as companies attempted to increase efficiencies,” said PwC US.
   Looking forward, the firm said it remains “optimistic” that M&A activity will continue to increase in the fourth quarter of 2015.
   “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,” Jonathan Kletzel, U.S. transportation and logistics leader for PwC, said of the report. “Historically, the fourth quarter has been a popular time for M&A activity as strategic investors prepare for the next year’s operations, and we believe the M&A environment will likely see increased activity. At the same time, in order to capitalize on growth, transportation executives remain focused on strengthening their core business operations and expanding in high growth markets.”
   PwC US’s Intersections transportation and logistics M&A analysis is compiled using transaction data from Thomson Reuters.