newsworthy
Study shows pickup in transport/logistics M&A activity
After a two-year hibernation period caused by the financial
crisis and subsequent economic downturn, animal spirits
seem to be returning to the world of logistics mergers and
acquisitions.
According to a report issued in mid-February by consultancy PwC (formerly PricewaterhouseCoopers), 42 deals in
the global transportation and logistics sector valued at $50
million or more were announced in the fourth quarter of
2010, up from 38 deals in the third quarter. Most notable
was the spike in deal value, a sign that “mega-deals” were
back in vogue. The aggregate price tag of announced deals
in the fourth quarter was $35.6 billion, up from $16.9 billion in the prior quarter.
Of the 14 deals in 2010 exceeding $1 billion, six were
announced in the fourth quarter. Half of all large deals last
year involved either acquisitions or public-private partnerships in what the report characterized as the “passenger
ground” sector, such as rails and transit.
The rise in global deal-making activity came despite a relatively quiet U.S. landscape. There were 21 deals involving
North American companies, compared with 63 in the Asia
& Oceania region and 25 in Europe. Furthermore, only one
mega-deal in the fourth quarter involved a North American
entity—Southwest Airlines’ pending $1.04 billion purchase
of rival Air Tran Holdings.
MORE APPETITE FOR RISK
Kenneth Evans, U.S. transportation and logistics leader for
PwC, said fourth-quarter M&A activity took the global
industry to levels not seen since 2008. With economies
rebounding, corporate balance sheets strengthening, credit
markets recovering, and companies stockpiling billions of
dollars in cash ready to put to work, Evans sees deal activity remaining robust through the balance of the year and
well into 2012. He also predicts that by next year, global
M&A activity will have returned to levels not seen since
2007, the last full year of strong economic growth before
the financial and economic roofs caved in.
Evans said that while a degree of caution still exists, fear
is giving way to a much greater appetite for risk, with more
companies on a stronger financial footing and the global
recovery self-sustaining. As evidence, Evans said he sees
fewer M&A deals involving so-called “distressed assets.”
Most of those types of transactions, he said, have “already
been arranged and are coming out of the system.”
“Many companies are in a better position to engage in
new deals, as evidenced by lower average financial leverage
and higher cash positions,” Evans said in a statement
announcing the release of the report, Intersections: Fourth-
quarter 2010 global transportation and logistics industry
mergers and acquisitions analysis. “As a result, the overall
tone of the deal market is highly positive, and we’re opti-
mistic about … deal activity in 2011.”
Evans says accelerated M&A action will not be confined
to big companies and big deals. Smaller companies—
including family-owned businesses waiting for their com-
pany’s prospects to improve before they put themselves on
the block—will also get into the game, he said.
Evans said even though increased M&A action might
trigger consolidation among service providers, shippers
should not be worried about either a significant increase in
rates or reduced access to innovative products and services.
The global freight industry remains very fragmented and
competitive, and though freight rates have firmed in
response to an economic recovery, there are still “so many
options for shippers to play one transportation company
off of another,” he said.
Evans added that growth in the formation of new businesses—and the new products and competitive pricing that
accompany them—effectively mitigates the impact of M&A-driven consolidations shrinking the provider universe. ;
—M.S.
ground breakers
Hanson Logistics has announced plans for a $2 million
expansion of its Decatur, Mich., facility, which is used for
cold storage, mixing, and packaging by Dole Packaged
Foods. … Distribution Technology, a third-party logistics
service provider, is opening a new distribution complex
dedicated to Wal-Mart. Wal-Mart plans to spend more than
$1.7 million on renovations and the installation of an automated logistics system at the complex, which includes
100,000 square feet of space. … Swedish appliance maker
Electrolux is relocating its U.S. distribution operations from
Tennessee to a 600,000-square-foot facility in Fairburn, Ga.
… Interstate Warehousing is expanding two of its facilities.
The company is building an 80,000-square-foot addition to
its cold storage building in Murfreesboro, Tenn., and a
90,000-square-foot addition to its facility in Hamilton,
Ohio. … Brightpoint, a third-party logistics service provider
to the wireless communications and data industries, plans
to open a new distribution center in Reno, Nev.
