Report: Transport sector M&As experience lift
If the first quarter of the year is an indicator, 2010 could be a much healthier year for mergers and acquisitions in the transportation and logistics sector than the previous year, according to a report released Wednesday by consulting firm PricewaterhouseCoopers LLP.
There were 34 transportation and logistics-related deals announced in the first quarter, which exceeds the total number of deals announced in each of the four quarters of 2009.
'The positioning of acquirers to engage in deal activity continues to improve, supported by generally higher levels of traffic as well as better liquidity and capital market conditions,' said Kenneth Evans, U.S. transportation and logistics leader for PricewaterhouseCoopers, in a statement. 'Rising expectations for economic growth may encourage those acquirers who have remained on the sideline to re-enter the deal market.'
The first quarter 2010 deal value was estimated at $13.4 billion, up $7.5 billion from the first quarter of 2009. Excluding Berkshire Hathaway's whopping $36.7 billion acquisition of the Burlington Northern Santa Fe railroad from the 2009 totals, PricewaterhouseCoopers estimates in its Intersections report that the 2010 deal value is on pace to far exceed last year's level.
Minority stakes still dominate deal participation in the transportation and logistics sector, however the consulting firm points to a shift toward strategic investments.
The PricewaterhouseCoopers report noted that about half of M&A activity in 2009 and during first quarter of 2010 in the transportation and logistics sector occurred in the Asia and Oceania region, compared to 35 percent in 2008. For example, China Eastern Airlines bought Shanghai Airlines in July 2009 for $1.1 billion, and in the first quarter the Japanese government through its Enterprise Turnaround Initiative Corp. acquired the bankrupt Japan Airlines for $7 billion.
'Acquirers in the Asia and Oceania region and in emerging and developing economies are increasingly making their presence felt in M&A activity to acquirers outside these areas,' said Klaus-Dieter Ruske, global transportation and logistics leaders for PricewaterhouseCooper. 'This growth has been driven by deals involving Chinese entities, in addition to a concurrent decline in deals by European acquirers.'
However, the consulting firm warned that acquirers face additional and perhaps more complex due diligence when buying other firms than they may have encountered prior to 2008. Integration aspects to consider include:
' Health care.
' Climate change requirements.
' Human resources.
' Commodity prices.
' Pension plans.
' Information technology.
' Changing tax laws.
'M&A activity inevitably generates a certain amount of immediacy, so it pays to be prepared,' PricewaterhouseCooper said. 'According to the report, companies that might be rusty in the area of due diligence because few (if any) deals were completed during the past two years may need to dust off their existing processes and make sure the right resources are in place so they are ready when opportunity knocks.'
PricewaterhouseCooper's first quarter Intersections report is available online.