The slowed economy has severely dampered mergers and acquisitions for U.S. transportation and logistics companies, according to a report by PricewaterhouseCoopers LLP.
Intersections: Global Transportation & Logistics Mergers and Acquisitions Analysis for Q1 2008 said that global deal activity is not on track to match 2007 levels due to U.S. weakness despite strong numbers in the rest of the world.
“Globally, the volume of transactions is on pace with the prior year, if you exclude the United States,” Kenneth H. Evans, Jr., U.S. transportation and logistics sector leader at PricewaterhouseCoopers told FleetOwner.
“Because of the financial crisis, it may put a damper on future transactions,” Evans added. “We thought the weakness of the dollar would make it easier, but uncertainty of the market results in worries about the value of U.S. companies. We were a little surprised by the decrease in activity.”
According to PricewaterhouseCoopers, the number of deals in the first quarter of 2008 is on pace to exceed both 2006 and 2007 levels in both number and value, but concern over an economic slowdown has most likely lowered the attractiveness of U.S. targets and made U.S. acquirers less likely to make deals.
“The strength of deals throughout the world, especially in Europe, is intriguing, because [merger and acquisition] value are still very good there, which is not a complete surprise,” Evans said. “Transportation and logistics is still consolidating and is still an interesting place for mergers and acquisitions to happen.”
Large deals—those with disclosed values above $1 billion—are still on pace to exceed 2006 and 2007 levels. Firms in Asia and Oceania are both the leading targets and acquirers in many of the major deals made in the first quarter.
U.S. financial investors appear to have been negatively impacted by the tightening credit market, the report said, mostly due to an increase in risk premiums and a decline in the debt market.
“I think it is very difficult to know how long the market will be down in the U.S., because companies still can’t get financing,” Emeric Deramaux, manager of transaction services for PricewaterhouseCoopers, told FleetOwner.
According to Deramaux, there were 39 mergers or acquisitions involving U.S. companies in 2006 and 41 in 2007, but only five in the first quarter of this year.
Evans added that companies looking to attract buyers need to be realistic. “Just operate effectively,” he said. “Be realistic about the value you would look for. Looking back to 2007 and 2006 [sale prices], obviously those evaluations were higher back then. I think it will continue to be a challenging environment on the financing side, at least for most of 2008.”