A new study by consulting firm PricewaterhouseCoopers LLP finds that merger and acquisition (M&A) deal activity dropped significantly during first quarter 2009 in the global transportation and logistics industry. Just 18 at a disclosed value of at least $50 million each were announced during the period -- a far cry from the fourth quarter in 2008, when 43 such deals took place.

This ongoing slowdown in M&A deals within the transportation and logistics sector also highlighted changes in behavior among deal participants, noted Kenneth Evans Jr., PricewaterhouseCoopers’ U.S. transportation and logistics sector leader.

"Most notable is the shift toward minority stake purchases, which can be attributed to tight credit and strategic buyers’ aversion to risk," he said in the report. "We expect these factors will lead to minority stake purchases continuing to make up a large percentage of deals announced during the rest of the year."

"There are a couple of things to look at with this. First, it’s a reminder that cash is king right now; you hate to get rid of it by making a deal, then find out you need it," Eric Starks, president of research firm FTR Associates, told FleetOwner. "Second, it shows that the likelihood that there are good deals out there right now is not very high at all."

According to PricewaterhouseCoopers’ report -- entitled "Intersections: First-quarter 2009 mergers and acquisitions analysis" -- activity only continued to increase among non-U.S. parties during the first quarter this year. Foreign entities made up 94% of deal volume – up from 71% in 2007 and 81% in 2008 – and only one U.S. entity announced a deal during first quarter 2009.

Average deal values declined significantly, from $513 million in 2008 to $159 million in the first quarter this year (for deals announced with a value of at least $50 million) because of the general absence of large deals, noted PricewaterhouseCoopers. In place of large deals, worth at least $1 billion, were minority stake purchases, accounting for 39% of deals announced during first quarter 2009, up from 30% of the total deals announced in 2008.

"We believe that financing and overall economic sentiment will continue to discourage a rebound in transportation and logistics deal activity," noted Klaus-Dieter Ruske, global transportation and logistics sector leader for PricewaterhouseCoopers. "Moving forward, we will likely see M&A activity driven by need because a significant increase in deal activity will likely not occur until we see substantial recovery in economies around the globe."

The lack of deal activity in the U.S. by domestic firms, especially in trucking, again shows that freight volumes remain sluggish, said FTR’s Starks. "Why do trucking companies buy other carriers? To either increase capacity or create additional reach into areas they don’t serve," he explained. "But right now, freight volumes are still low so the need for extra capacity isn’t there. And carriers don’t want additional reach because they are just trying to put the capacity they already have to work. So it’s really not a surprise that deal-making activity is way down."

For information and to access the full report, visit the PricewaterhouseCoopers LLP website.