Deal Activity in the Global Transportation and Logistics Sector Shows Improvement in the First Quarter of 2010, According to PricewaterhouseCoopers

NEW YORK, May 12 /PRNewswire/ -- The merger and acquisition (M&A) environment continues to exhibit signs of recovery in the global transportation and logistics (T&L) sector, demonstrated by the general rise in overall deal activity in Q1 2010, according to a new PricewaterhouseCoopers LLP report, Intersections: First-quarter 2010 global transportation and logistics industry mergers and acquisitions analysis.  

In the first quarter of 2010, the pace of deal announcements in the T&L sector was strong, as compared with 2009. There were 34 deals announced in the first quarter, which exceeds the total number of deals announced in each of the four quarters last year. Additionally, this quarter's aggregate deal value is on pace to approach the value level of 2009; however, when excluding a major rail transaction from 2009 totals, 2010 deal value is actually on pace to far exceed last year's level. This improvement may indicate that acquirers are gaining confidence to engage in larger deals.

"The positioning of acquirers to engage in deal activity continues to improve, supported by generally higher levels of traffic as well as better liquidity and capital market conditions," said Kenneth Evans, U.S. transportation and logistics leader for PricewaterhouseCoopers. "Rising expectations for economic growth may encourage those acquirers who have remained on the sideline to re-enter the deal market."

Despite improved conditions for raising capital, minority stake purchases jumped in the first quarter of 2010, and deal participation shifted slightly toward strategic investors. While the increase in minority stake purchases continues a trend from Q4 2009, the shift toward strategic investment is a trend reversal from the previous quarter, in which financial investor participation had improved on a relative basis.

The relative level of M&A activity for Asia and Oceania targets increased throughout 2009 and in Q1 2010. Asia and Oceania targets accounted for approximately half of all announcements in 2009 as well as in the first quarter of this year, compared to approximately 35 percent in 2008. A single passenger air mega-deal in Q1 2010 led Asia and Oceania acquirers and targets to account for the majority of deal value, comprising 78 percent of deal value by target region.

"Acquirers in the Asia and Oceania region and in emerging and developing economies are increasingly making their presence felt in M&A activity relative to acquirers outside these areas," said Klaus-Dieter Ruske, global transportation and logistics leader for PricewaterhouseCoopers. "This growth has been driven by deals involving Chinese entities, in addition to a concurrent decline in deals by European acquirers."

M&A Due Diligence in a Recovering Economy

The first quarter Intersections report takes a closer look at the role of M&A due diligence in a recovering economy and the impact it will have in the transportation and logistics sector. As the global economy begins to recover, deal making might offer the leverage T&L companies need to push ahead of the competition.  Companies with strong balance sheets and robust cash reserves are expected to be in the best position for strategic merger and acquisition opportunities.

To get the deals done properly, T&L companies should consider how two years of economic contraction have altered the balance of supply and demand within the value chain, as well as the cost structure impact of certain issues including healthcare, climate change, commodity prices, pension plan structures, and changing tax laws.

M&A activity inevitably generates a certain amount of immediacy, so it pays to be prepared. According to the report, companies that might be rusty in the area of due diligence because few (if any) deals were completed during the past two years may need to dust off their existing processes and make sure the right resources are in place so they are ready when opportunity knocks.

For information on Intersections and to access the full report, including the special section on M&A due diligence in a recovering economy, visit http://www.pwc.com/us/industrialproducts.

About PricewaterhouseCoopers Global Transportation and Logistics Practice

PricewaterhouseCoopers' Transportation and Logistics practice is composed of a global network industry professionals who provide assurance, tax, and advisory services to public and private transportation and logistics companies around the world. We bring experience, international industry best practices, and a wealth of specialized resources to help solve business issues.

About PricewaterhouseCoopers

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SOURCE PricewaterhouseCoopers