Transport & logistics mergers on downward trend: report

NEW YORK — Deal activity in the global transportation and logistics (T&L) sector dropped significantly during the first quarter 2009, according to a report released today by PricewaterhouseCoopers LLP.

Eighteen large merger and acquisition deals were announced at a disclosed value of at least $50 million each, compared to the fourth quarter 2008, when 43 such deals were announced.

Activity continued to increase among foreign entities, which made up 94 percent of deal volume for T&L targets in the quarter, up from 71 percent in 2007 and 81 percent in 2008, said the report.

Average deal values declined significantly, from $513 million in 2008 to $159 million in the first quarter (for deals announced with a value of at least $50 million) because of the general absence of large deals worth at least $1 billion.

"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. T&L sector leader at 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."

Passenger-air and logistics sectors saw the most deal activity in value during first quarter 2009, a change from past years when shipping took the lead.

There was an overall absence of deals in the shipping sector by financial investors during the first quarter.

Capital preservation by potential buyers contributed to the absence of large deal activity. The difficult financing environment witnessed in 2009 has caused the most well-capitalized strategic buyers to engage in smaller deals, including minority stakes, divested assets, and distressed targets. It is likely that this trend will continue, with a general lack of large deals being made in the T&L sector throughout 2009 and possibly beyond.

The full report can be accessed at visit www.pwc.com/transport.