Global merger and acquisition activity in the transport and logistics sector was subdued in the fourth quarter of 2014, finishing a mostly flat year for M&A, according to an analysis released today by the U.S. arm of consultancy PwC.
For the year, there were 208 transactions valued at more than $50 million, resulting in a total deal value of $75 billion, the report said. In 2013, there were 205 deals valued at $75.1 billion. Fourth-quarter deal volume totaled 53 transactions worth $15.9 billion, significantly below year-earlier levels, PwC U.S. said.
Jonathan Kletzel, who heads PwC's transportation and logistics practice, attributed the 2014 declines to 6 percent fewer mega-deals—those valued at $1 billion or more—than in 2013. Most of the big 2014 deals were in the infrastructure category, and involved toll roads and ports, he said. About 47 percent of the dealmaking occurred in the shipping and trucking sectors, with most of the trucking activity occurring in North America, Kletzel said. Half of the acquiring companies were based in the Asia-Pacific region, with 28 percent in Europe and 23 percent in North America, he said.
So-called local transactions accounted for 70 percent of total activity, while cross-border deals, especially in emerging markets, declined, Kletzel said. He expects that trend to continue in 2015, mainly because local transactions involve more redundancies in transportation networks and operations, are usually easier to execute, and yield more synergies than cross-border integrations.
Kletzel said he's cautiously optimistic about 2015 M&A activity, saying the market should be buoyed by an improving U.S. economy, a strong U.S. dollar that will make offshore targets more attractive for U.S. economies, and the dramatic decline in oil prices that should free up more capital for acquisition-based growth and drive expansion plans of some transport operators. Kletzel cited the example of an airline that might be encouraged by lower jet-fuel prices to expand its route offerings, and could make an acquisition to implement that strategy.
Benjamin Gordon, CEO and managing partner of BG Strategic Advisors LLC, a supply chain M&A advisory firm, had a more favorable view of 2014 performance. In an e-mail today, Gordon said transportation and logistics activity was fueled by a massive rise in overall M&A flows. Total U.S. M&A volume hit $1.6 trillion in 2014, a 43-percent jump from 2013 and the highest activity on record, he said. Initial public offerings raised $96 billion last year through 293 deals, the highest level since 2000, he said.
"Overall, we are seeing an influx of capital into the transportation and logistics sector," Gordon said, adding that within the supply chain, "the deal and capital markets are booming." Gordon didn't have a breakdown of 2014 supply chain M&A activity within the total market.
Gordon said the upward trend should continue, because transport and logistics companies have traditionally rewarded investors with attractive returns; banks, private equity and the public markets are eager to fund acquisitions, and publicly held companies must pursue acquisitions to fulfill aggressive expectations for growth.
