Transport and Logistics M&A Cooling From Torrid 2015 Pace

Report says deals grew from the first quarter to the second quarter but consolidation remains behind last year’s level

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The biggest deal activity in the first half of the year came in China, the PwC report said. PHOTO: GETTY IMAGES

By 

ERICA E. PHILLIPS

July 28, 2016 6:00 a.m. ET

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Transportation and logistics deals grew in volume and value in the second quarter, according to analysts at PricewaterhouseCoopers, but consolidation in the business remains behind last year’s torrid pace.

A global total of 51 mergers and acquisitions totaling $34 billion in value were reported in the three-month period ending June 30, a PwC report found, an increase of 6% in volume and 20% in value from the first quarter of the year.

Compared with the same three-month period in 2015, however, the number of global transportation and logistics deals was down 18% in the second quarter and their total value was off 22%.

“When you have record years like you did in 2015 it often tends to diminish the strength of pretty strong numbers,” said PwC transportation and logistics consultant Andy Schmahl. “But there’s a lot of market-driven reason that make us think the hunt for growth is going to continue and M&A will remain robust.”

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The deal activity in the second quarter was led by China’s Maanshan Dingtai Rare Earth & New Materials Co. Ltd.’s $16.8 billion acquisition of SF Holding (Group) Co. and Virgin America Inc.’s $4.2 billion acquisition of Alaska Air Group Inc.

So far in 2016, Chinese companies account for two of the five largest deals in transportation and logistics. PwC analysts attributed the explosion of activity in China to the country’s growing e-commerce sector. “These companies have to scale quickly and they’re looking for ways to grow,” Mr. Schmahl said

PwC analysts noted the trend has been spreading globally. Two years ago, six of the top 10 M&A deals in transportation and logistics came in Europe and the U.S., according to the PwC report. So far this year, only three of the top 10 are U.S. or European companies.

Mr. Schmahl said rapid changes in logistics technology and data analytics could also drive more deals in the coming months. “Incremental developments in technology are coming more fast and furious—faster than any one transportation company can develop in and of itself,” he said. “We’ll start seeing companies using acquisition to increase their capabilities.”

Still, uncertainty may put a damper on deal-making in the second half of the year. The U.K. voter referendum to exit from the European Union, the fate of the proposed Trans-Pacific Partnership trade agreement, the slowing of the Chinese economy, the U.S. presidential elections and other geopolitical events “could send things in a different direction,” Mr. Schmahl said.

“The macro trends suggest that a robust M&A market will continue—just with some caveats,” he said.