Value of global logistics industry to fall short of 2007 levels: report

 TORONTO, Ont.– According to a PricewaterhouseCoopers (PwC). report released November 19, levels of deal activity and total deal value in the transportation and logistics industry announced during the first three quarters of 2008 are not likely to surpass 2007 totals.

The report, entitled ‘Intersections: Global Transportation & Logistics Mergers and Acquisitions Analysis – Third Quarter 2008’, noted that total deals through the third quarter of  2008 came to 125, which is not on pace to match the 193 deals announced in 2007.

There was a significant number of large deals (disclosed value of at least $1 billion) announced through the third quarter of 2008, with 14 large deals contributing a total deal value of $66 billion.  However, with only one of the 14 large deals occurring in the third quarter, total deal value declined, reaching only $11 billion in the third quarter.

With the current economic and credit environment, deal activity in the fourth quarter will likely not exceed the levels seen in the third quarter and may even decline, said the report.

The report also confirmed a slowdown in deal activity located outside of the US.

“Given current  economic observations and trends affecting the T&L industry, it is unlikely that the number and total value of deals will match last year’s levels, as M&A activity is likely to slow down in the fourth quarter,” said Todd Thornton, Canadian transportation and logistics leader at PwC.  “It is now apparent that the faltering credit markets have caused a slowdown in both domestic and international deal activity.”

According to Intersections, interest in passenger air targets (measured by level of announced deal value) has declined dramatically since 2006 in favour of passenger ground and rail targets. Only 12% of deal value was attributed to passenger air targets during the first three quarters of 2008, compared with 29% of deal value in 2007 and 48% of deal value in 2006. Meanwhile, one-fourth of the total deal value in the T&L industry was claimed by passenger ground targets while rail targets accounted for an additional 23% of deal value.  

 “Overall, the transportation & logistics industry continues to attract M&A investment amidst increasing turbulence in the global financial markets,” said Thornton. “However, cross-border acquisitions for US targets will continue to be weak, given the decreased liquidity of the credit markets and a recent strengthening of the US dollar. We believe this trend will reverse, but it may take a longer period of time than originally expected.”

(For access the full report, visit: www.pwc.com/transport. )