The crisis in global financial markets has put a damper on merger and acquisition activity in the global transportation and logistics sector, according to a new report by PricewaterhouseCoopers.
During the first quarter of 2009, only 18 M&A deals were announced that had a disclosed value of at least $50 million. That compares with 43 such deals during the fourth quarter of 2008. Large deals (with a disclosed value of $1 billion or more) were nonexistent for the T&L sector during the first quarter. That contrasts with 22 large deals announced in 2008 and 17 in 2007, says the report, "Intersections: First-quarter 2009 mergers and acquisitions analysis."
There was an overall absence of deals in the shipping sector during the first quarter of 2009, unlike in the past when investors were more interested in shipping than other transportation modes. The passenger air and logistics sectors experienced the most deal activity in value during first quarter of 2009. Passenger air accounted for 34 percent of M&A activity, compared with 17 percent in 2008 and 27 percent in 2007. Deals involving logistics targets accounted for 32 percent of activity during first quarter 2009 compared with 13 percent in 2008 and 14 percent in 2007.
Given the difficult financial environment, potential buyers have focused on capital preservation, rather than on pursuing large-scale investments. Many well-capitalized strategic buyers prefer to engage in smaller deals, including minority stakes, divested assets, and distressed targets. This trend will likely continue throughout this year, and possibly beyond, according to the report.
"The continued slowdown of M&A activity for the transportation and logistics sector during the first quarter of 2009 presented interesting changes in behavior among deal participants," said Kenneth H. Evans Jr., U.S. transportation and logistics sector leader, PricewaterhouseCoopers. "Most notable is the shift toward minority stake purchases, which can be attributed to tight credit and strategic buyers' aversion to risk. We expect these factors will lead to minority stake purchases continuing to make up a large percentage of deals announced during the rest of the year."
Ninety-four percent of the companies targeted for mergers and acquisitions in the transportation and logistics sector were foreign entities, up from 71 percent in 2007 and 81 percent in 2008. Only one U.S. entity announced a deal during first quarter 2009.
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