Industry Focus: 2008 Predictions for Transportation & Logistics

As U.S. economy sputters, "trucking recession" seen easing, 3PL market looks to continue growth.


Geographic expansion also is vital, as customers look to their 3PLs to manage ever-more-global supply chains. Last year, for example, Menlo Worldwide, the logistics subsidiary of Con-way, acquired Chic Logistics, an established provider of domestic third-party logistics and transportation management services in the People's Republic of China, with a vision to create a "'first-mile' logistics in China through 'last-mile' delivery in North America" solution for customers running global supply chains. "Being in the right global markets is very, very important [for 3PLs] these days," Armstrong notes.

M&A Strong in '07

These assorted market trends have driven mergers and acquisitions activity within the global transportation and logistics sector to record highs over the past two years, according to "Intersections," PricewaterhouseCoopers' quality report on M&A activity in the industry. Total deal volume reached a 20-year high with 1,291 deals in 2007, up from the record number reached in 2006. However, total deal value fell in 2007 to $83 billion, down from the two-decade high of $164 billion reached the year before. The report's figures include numbers for the passenger air and passenger ground segments, which can account for significant M&A volume. But shipping, trucking and logistics (as well as cargo air and mixed mode) continue to account for well over half of the mergers and acquisitions activity.

Analyzing the current report's numbers against past figures, Kenneth H. Evans, Jr., U.S. transportation and logistics sector leader at PricewaterhouseCoopers, points out that while shipping has historically been a cyclical industry, the M&A cycle has remained fairly close to peak levels for the better part of three years. "Whenever there is a lot of value being created in companies as there has been in shipping, it just attracts very significant outside investment," Evans says. "It's also generating a lot of cash in the hands of shipping companies to pursue strategic acquisitions."

Will the prospect of a downturn in the U.S. economy put potential M&A deals on the back burner in 2008? Not necessarily, according to PricewaterhouseCoopers. Evans says that, in looking at historical M&A activity stretching back two decades, he and his colleagues typically saw somewhat of a drop in activity as the U.S. economy was entering or passing through recession. But even with all the anxiety about the economy's direction in 2007, the pace continued unabated last year. "What's going to be interesting is to see whether the first quarter of 2008 shows sustainable activity coming up to the level of the last quarter of 2007," adds Emeric Deramaux, manager for transaction services with PricewaterhouseCoopers and a collaborator on the "Intersections" report, "because the market was expecting, and we were expecting, a decrease in at least the financial investors' activity, but it simply has not happened." The Q1 figures, Deramaux says, should shed some light on whether 2008 will see continued growth or somewhat of a slowdown. Stay tuned...

  • Enhance Your Experience.

    When you register for SDCExec.com you stay connected to the pulse of the industry by signing up for topic-based e-newsletters and information. Registering also allows you to quickly comment on content and request more infomation.

Already have an account? Click here to Log in.

Enhance Your Experience.

When you register for SDCExec.com you stay connected to the pulse of the industry by signing up for topic-based e-newsletters and information. Registering also allows you to quickly comment on content and request more infomation.

OR

Complete the registration form.

Required
Required
Required
Required
Required
Required
Required
Required
Required
Required
Required