A rash of “mega-deals” during the second quarter of 2015 have made transportation and logistics one of the hottest mergers and acquisitions sectors, boosting the average deal value to US$564 million, according to a recent study by PricewaterhouseCoopers.
There were nine M&A deals made during the quarter with a combined value of $23.6 billion, which is almost 69 percent of total deal value for logistics services Q2 2015. In April, FedEx began its acquisition of express company TNT at a value of $4.8 billion, which was the largest M&A announcement during the three-month period.
Cross-border expansions were key drivers for many of the deals, particularly in advanced economies. Cross-border activity is less significant in emerging economies, the report said, since those companies tend to be smaller and are looking to acquire local competitors to increase market share.
Growth was a key driver as transportation and logistics companies sought to expand their geographical footprint through acquisition. In the airlines industry, United Airlines agreed to buy a 5 percent stake in Brazil’s Azul SA, Delta showed interested in investing in Japan’s Skymark Airlines, and IAG acquired Ireland’s Aer Lingus. Activity by financial investors increased to 44.3 percent in the second quarter, compared to 38.9 percent in the first quarter.
It was also a big quarter for surface transportation, with trucking deals making up 28 percent of overall deal volume, compared to 22 percent in the first quarter. Of course, the FedEx/TNT deal involves a considerable amount of trucks as well. U.S.-based XPO Logistics acquired 67 percent of Norbert Dentressangle of France for $2.86 billion, positioning XPO to become a global supply chain provider.
More than one-third of the deals made in the second quarter were based in the Asia and Oceania regions. Ten of 21 deals announced in these areas were based in China and remained in its local market. PricewaterhouseCoopers predicted that M&A deal activity will continue throughout the year, driven by the strengthening U.S. economy and a strong dollar against other currencies, making cross-border acquisitions by American companies look quite attractive. Gas prices in the United States are down by more than 30 percent from this time last year, with jet fuel down 40 percent, year-over-year, also making acquisitions attractive due to lower expenses.