New York — August 8, 2008 — Total transportation and logistics (T&L) merger and acquisition (M&A) deal value for the first half of 2008 is on pace to surpass 2007 totals, according to PricewaterhouseCoopers' second-quarter edition of "Intersections: Global Transportation & Logistics Mergers and Acquisitions Analysis."
The rapid rise in deal value over the first half of the year has been driven primarily by the growing interest in large T&L deals (deals with disclosed value of at least $1 billion), with four of the five largest deals of the year being announced in the second quarter. While deal value is on track to surpass 2007 levels, deal volume is falling short. In the first half of 2008, there were 84 deals announced, compared to the 190 announced for all of 2007.
Interest in large deals was robust during the first half of 2008, with 11 large deals announced, placing 2008 in the position to exceed both the 2006 and the 2007 levels (20 and 16 large deals, respectively). The largest deal for the year was the first announced since 2006, with a disclosed value exceeding $10 billion. Of the large deals announced this year, three involved a U.S. entity.
"We expected that the pace of overall transportation and logistics deal activity would be dependent on a recovery in deal involvement by U.S. entities; this held true for deals announced during this most recent quarter," said Kenneth H. Evans, Jr., U.S. transportation and logistics sector leader at PricewaterhouseCoopers. "Greater deal activity involving U.S. entities is necessary for the pace of overall deal activity to accelerate through the last two quarters of 2008."
The passenger ground category was responsible for 29 percent of deal value in the first half of 2008, with the largest deal of the year accounting for the majority of that value. Interest in rail and logistics targets also saw increases when compared to 2006 and 2007. Logistics companies accounted for 19 percent of total deal value, up from 15 percent in 2007 and 11 percent in 2006. Rail companies have seen a dramatic rise over the past two years, accounting for 16 percent of deal value in the first half of 2008 compared to 8 percent in 2007 and only 2 percent in 2006.
High-level risk premiums and the decline in debt market liquidity seen in the second half of 2007 have spilled over into 2008, causing financial investors to continue to pull back their participation in the M&A sector. Despite the overall decline in participation by financial investors in the T&L industry, they remained involved in the large deals announced during the first half of the year. Approximately one-third of deal volume (28 deals) during the first half of 2008 involved financial investors who have favored shipping and logistics deals over other market segments.
China Still Hot
Firms in Asia and Oceania (Australia, New Zealand, Melanesia, Micronesia and Polynesia) continued to serve as significant contributors as both targets and acquirers in deal announcements of more than $50 million during the first quarter. The U.K./Eurozone region, was also very active, exceeding Asia and Oceania in deal volume (28 deals versus 27 deals, respectively) and deal value (35.5 percent and 21.1 percent of large deals) for the first half of 2008. Although the first quarter has shown signs of a slowdown compared with the same time last year, both regions are on pace to meet 2007 levels of 45 and 64 deals, respectively. In comparison, while North America only contributed 16.9 percent of deal volume for the first half of 2008, the region exceeded expectations by contributing 34.7 percent of deal value.
As previous reports have predicted, interest in BRIC (Brazil, Russia, India, and China) targets, especially in China, continued to hold strong in the first half of 2008. Chinese targets accounted for almost half of the 18 deals (eight deals) announced within the BRIC nations, as China continues to consolidate product and service providers in the transportation and logistics industry. Deals with an acquirer and a target in the same country typically change pace as economies evolve; however, China continues to dominate this space, representing approximately 58 percent of deals announced in the first half of the year.
More information and access to the full report is available through www.pwc.com/transport.
The rapid rise in deal value over the first half of the year has been driven primarily by the growing interest in large T&L deals (deals with disclosed value of at least $1 billion), with four of the five largest deals of the year being announced in the second quarter. While deal value is on track to surpass 2007 levels, deal volume is falling short. In the first half of 2008, there were 84 deals announced, compared to the 190 announced for all of 2007.
Interest in large deals was robust during the first half of 2008, with 11 large deals announced, placing 2008 in the position to exceed both the 2006 and the 2007 levels (20 and 16 large deals, respectively). The largest deal for the year was the first announced since 2006, with a disclosed value exceeding $10 billion. Of the large deals announced this year, three involved a U.S. entity.
"We expected that the pace of overall transportation and logistics deal activity would be dependent on a recovery in deal involvement by U.S. entities; this held true for deals announced during this most recent quarter," said Kenneth H. Evans, Jr., U.S. transportation and logistics sector leader at PricewaterhouseCoopers. "Greater deal activity involving U.S. entities is necessary for the pace of overall deal activity to accelerate through the last two quarters of 2008."
The passenger ground category was responsible for 29 percent of deal value in the first half of 2008, with the largest deal of the year accounting for the majority of that value. Interest in rail and logistics targets also saw increases when compared to 2006 and 2007. Logistics companies accounted for 19 percent of total deal value, up from 15 percent in 2007 and 11 percent in 2006. Rail companies have seen a dramatic rise over the past two years, accounting for 16 percent of deal value in the first half of 2008 compared to 8 percent in 2007 and only 2 percent in 2006.
High-level risk premiums and the decline in debt market liquidity seen in the second half of 2007 have spilled over into 2008, causing financial investors to continue to pull back their participation in the M&A sector. Despite the overall decline in participation by financial investors in the T&L industry, they remained involved in the large deals announced during the first half of the year. Approximately one-third of deal volume (28 deals) during the first half of 2008 involved financial investors who have favored shipping and logistics deals over other market segments.
China Still Hot
Firms in Asia and Oceania (Australia, New Zealand, Melanesia, Micronesia and Polynesia) continued to serve as significant contributors as both targets and acquirers in deal announcements of more than $50 million during the first quarter. The U.K./Eurozone region, was also very active, exceeding Asia and Oceania in deal volume (28 deals versus 27 deals, respectively) and deal value (35.5 percent and 21.1 percent of large deals) for the first half of 2008. Although the first quarter has shown signs of a slowdown compared with the same time last year, both regions are on pace to meet 2007 levels of 45 and 64 deals, respectively. In comparison, while North America only contributed 16.9 percent of deal volume for the first half of 2008, the region exceeded expectations by contributing 34.7 percent of deal value.
As previous reports have predicted, interest in BRIC (Brazil, Russia, India, and China) targets, especially in China, continued to hold strong in the first half of 2008. Chinese targets accounted for almost half of the 18 deals (eight deals) announced within the BRIC nations, as China continues to consolidate product and service providers in the transportation and logistics industry. Deals with an acquirer and a target in the same country typically change pace as economies evolve; however, China continues to dominate this space, representing approximately 58 percent of deals announced in the first half of the year.
More information and access to the full report is available through www.pwc.com/transport.
