PwC's analysis of the latest developments, M&A deals, joint ventures and strategic alliances in the transport and logistics industry in the first half of 2020
- 8,6 %
percent is the forecast decrease in gross value added (GVA) in the European freight transport and logistics industry in 2020.
Aviation industry's return to pre-crisis levels to be delayed.
mergers and acquisitions announced in H1 2020.
4 of the 8
mega deals related to infrastructure.
Your expert for questions
Transport & Logistics Industry Leader at PwC Germany
Tel: +49 201 438-1107
Aircraft remain grounded, container and cruise ships are stuck in port, travel has been severely restricted and many factories have temporarily scaled back production: the coronavirus crisis has hit the transport and logistics industry particularly hard. According to a scenario analysis conducted by PwC, gross value added in the European freight transport and logistics industry is expected to drop by 8.6 percent in 2020 before rebounding slowly as the economic recovery takes a U-shape.
“Many companies in the transport and logistics industry have entered into crisis mode on account of the coronavirus pandemic. Now the question is: how quickly can the industry recover? Digitalisation and innovation will play a key role in this regard.”
The impact the crisis is having is particularly evident in the number of deals announced, which declined sharply in the first half of the year: just 92 mergers and acquisitions with a volume exceeding USD 50 million were announced between January and June (H1 2019: 138; H2 2019: 123). There was also a precipitous drop in the number of strategic alliances in the second quarter. The total deal volume decreased by more than half, amounting to a mere USD 29.9 billion (H1 2019: USD 68.4 billion; H2 2019: USD 76.7 billion). European companies and investors proved to be surprisingly resilient, participating in some 33 acquisitions (H1 2019: 33; H2 2019: 36) with a total volume of USD 10.3 billion.
“In times of uncertainty there's little room for strategic moves such as mergers, acquisitions and cooperation arrangements. Thus, it comes as no surprise that the number of deals and cooperation arrangements has decreased significantly.”
The pandemic's impact on the industry's subsectors has varied greatly. Passenger transport, and the airline industry in particular, have been hit the hardest by the crisis: demand all but evaporated with the imposition of travel restrictions and quarantines, severely impacting revenue at airlines and airports as well as bus and rail companies. PwC's experts expect the airline industry in particular to face an L-shaped recession: after a sharp slump, there are no prospects of a recovery to pre-crisis levels any time soon.
Accordingly, private investors are taking little interest in the aviation industry, while various governments are stepping in with state aid to bail out “their” national airlines. Of the 92 transactions announced in the first half of 2020, five targeted airlines and five involved airports.
The pandemic has also had a significant impact on freight transport and logistics as borders were closed, demand fell and production halted. The impact on logistics companies has varied depending on the types of goods they transport and which industries they serve. While the coronavirus crisis has had a relatively mild effect on the food industry, for example, the pandemic's impact on the automotive industry has been relatively severe.
One thing is certain: logistics chains continued to function despite restrictions and the supply of everyday consumer goods was ensured at all times. The crisis has demonstrated how essential the industry really is.
The logistics and trucking subsector remains the industry's most active in terms of deal activity, particularly in two respects: On the one hand, warehouses are becoming increasingly important as consumers afraid of contracting the coronavirus while shopping and temporary store closures have propelled e-commerce. At the same time, logistics platforms are becoming more important and successful, significantly fuelling the debate on digitalisation.
Investors have been increasingly turning their attention towards infrastructure targets, even before the outbreak of the coronavirus. The pandemic has only reinforced this trend: The four largest of the in total eight mega deals (transactions with volumes exceeding one billion US dollars) in the first half of the year were transportation infrastructure deals.
Ports and terminals remain attractive targets for investors – also and especially in times of economic uncertainty – because they are considered long-term investments with stable returns. Furthermore, capacities at terminals are finite, leading frequently to bottlenecks, making these targets even more attractive for investors.
The largest deal in the first half of 2020 was also an infrastructure investment: Port & Free Zone World announced that it would acquire the remaining shares in DP World Ltd, one of the largest port operators in the world, for USD 2.72 billion. DP World will thus again be privately owned, inching closer towards its goal of becoming an end-to-end logistics provider focusing on infrastructure.
The experts at PwC expect the volume of deals in the transport and logistics industry to be muted in the second half of 2020. However, certain targets – warehouses and infrastructure in particular – will remain attractive options for investors. In addition, the financial pressure that many transport and logistics companies are under and the further consolidation of forwarders, especially in the fragmented logistics sector, will revive M&A activities and cooperation arrangements in the medium term.
“As a downstream industry, the transport and logistics industry is heavily dependent on how quickly other industries will recover from the crisis and kick start production again. Even though global logistics chains are currently being scrutinised, we don't expect any widespread glocalisation.”
These are the findings presented in PwC's “Transport and logistics barometer” report, in which PwC analyses current developments and trends in the transport and logistics industry. Global M&A activities, joint ventures, strategic alliances, etc. in the transport and logistics industry between 1 January and 30 June 2020 were recorded for the purposes of this report. All mergers and acquisitions with a volume of USD 50 million or more were taken into account. Transactions with a value of more than USD 1 billion are classified as mega deals.
Transport & Logistics Industry Leader, PwC Germany
Tel: +49 201 438-1107
Dr. André Wortmann
Industry Coordinator Transport & Logistics Deals, PwC Europe; Leiter Maritimes Kompetenzzentrum, PwC Germany
Tel: +49 40 6378-1414
Dr. Peter Kauschke
Director Transport and Logistics, Mobility, PwC Germany
Tel: +49 211 981-2167