Dramatic drop in deals in the transport and logistics industry in 2018

PwC analysis of global mergers and acquisitions show why Brexit could revitalise M&A activities in Europe in 2019.

Large drop in the number of deals but volumes relatively high

2018 was a mixed year for mergers and acquisitions in the transport and logistics industry. In total, 219 deals were announced. This marks a considerable drop since the previous year (283 deals). The second half of the year was particularly weak: while 127 mergers and acquisitions were announced in the first half of the year, there were just 92 deals between July and December. However, Brexit and investments from China could re-ignite M&A activities in Europe in 2019.

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Year-on-year comparison of deals

The total value of the deals was relatively high at $115.3 billion but still well below the previous year’s figure ($134.2 billion). The drop is also due to poor figures for the second half of the year: in the first six months of 2018 volumes reached a near-record $74.3 billion while they were just $41.0 billion in the second half of the year, the lowest in four years. These are the findings of a PwC analysis of global M&A activities in the transport and logistics industry. 

“Economic and geopolitical uncertainties, the trade war between the USA and China, protectionist tendencies and new regulations paralysed M&A activities in the transport sector and logistics in 2018, especially in the second half of the year. There was a distinct fall in the number of deals struck. Across the world acquirers are focussing on fewer but high-value targets.”

Dietmar Prümm, Head of Transport & Logistics at PwC Germany

Transport and logistics weak compared with other sectors

In comparison with other industries, the transport and logistics industry figures for 2018 were the poorest in eight years. Just 3.5% of all global acquisitions came from the transport and logistics sector (2017: 4.4%). Although the total number of cross-industry mergers and acquisitions was down (–2.4%), the 23% drop in deals aimed at the transport and logistics industry stood out. In comparison: the drop for businesses in industrial production amounted to –7.1%, while in the trade and consumer goods industry the number of deals actually rose slightly (+0.6%).

Brexit as possible deal driver in 2019

Overall, deals in Europe fell by 42%. In 2018 UK companies participated in 33% of deals in Europe. That means the United Kingdom is still the most active country in Europe. Transport and logistics companies from the UK and continental Europe are coming under pressure to guarantee rapid, reliable supply chains – this will continue even after the exit from the EU. Mergers and acquisitions can be a way of securing this via partners. There could be a considerable increase in this motivation depending on the outcome of further negotiations between the EU and the UK.

China strongest market

 

China is developing anticyclically – a high level of deal activity with a very low deal volume at the same time. Despite strict investment rules, it is the most active M&A player in global comparison: 81 deals with Chinese participation are a new record. Furthermore, Chinese companies were involved in six of the 21 so-called mega-deals with a volume of more than $1 billion and in more than a third of global deals overall (37%). However the cooling of the Chinese economy is exerting downward pressure on volumes: the total value of acquisitions was just $32.6 billion, significantly lower than the record set in 2017 ($44.8 billion).

Consolidations and internal restructuring are the drivers for the majority of acquisitions with Chinese involvement. The boom in Chinese e-commerce and growth in cross-border online trade are above all driving mergers and acquisitions in the area of logistics and trucking; this sector is showing the strongest M&A activities both in China and in overall international comparisons. The absolute majority of acquisitions are local, which is explained at least in part by new governmental investment regulations. Until now, Chinese logistics companies have rarely made major investments in Western companies. “If the economic situation in China were to improve soon, we would expect to see more investment in countries along the Silk Road and in Europe. In the first eight months of 2018, Chinese investments in Europe exceeded those in the USA fivefold. The tension between China and the USA will make European companies even more attractive for Chinese investment”, predicts Thomas Heck, Head of the China Business Group at PwC Germany.

Optimism for 2019

“I am optimistic about 2019. Major actors will again participate more intensively in mega-deals in the medium term. Consolidations and battles for position continue to multiply in the transport and logistics market in 2019. China and the UK are expected to play a key role. How intensively China participates in acquisitions outside Asia remains to be seen. What is clear is that Brexit will give rise to exciting developments in the new year.”

Dietmar Prümm, Head of Transport & Logistics at PwC Germany

Contact us

Dietmar Prümm

Leiter des Bereichs Transport und Logistik, PwC Germany

Tel: +49 211 981-2146

Dr. André Wortmann

Koordinator Transport & Logistik, PwC Deals, PwC Germany

Tel: +49 40 6378-1414

Thomas Heck

Partner, China Business Group, PwC Germany

Tel: +49 69 9585-1265

Dr. Peter Kauschke

Director Transport und Logistik, PwC Germany

Tel: +49 211 981-2167

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