M&A activity in the transport and logistics sector is recovering compared with last year, as shown by our global PwC study on mergers and acquisitions worldwide in the first half of 2019. Major acquisitions also took place in Switzerland and more can be expected.
Globally, 23% more mergers and acquisitions took place than in the second half of 2018
Companies in the transport and logistics sector are signalling the start of an M&A comeback in 2019. Overall, from January to June, 123 deals were announced, 23 more transactions than in the particularly slow second half of 2018. The total value of transactions also increased significantly compared with the second half of 2018, from US$41.6 billion to US$63.4 billion, reaching the average for the last five years.
And this was despite lots of uncertainties, such as the trade war between China and the USA, tensions with Iran and Turkey, Brexit getting closer and increasing tariffs.
The lively deal activity in the transport and logistics sector compared with other industries was partly due to the sector gaining strategic importance in an era of online commerce. It was also partly a result of investors arming themselves for uncertain times by buying infrastructure assets with stable, albeit moderate, returns.
The Panalpina mega deal could have a big impact on the Swiss market
The most significant consolidation of service providers in the European and Swiss transport and logistics sector was the merger between DVS and Panalpina via a public exchange for all Panalpina shareholders. With a transaction value of around CHF4.6 billion, this mega deal is one of the biggest and most important transactions in the European transport and logistics sector and the biggest in Switzerland in the last ten years. Through the merger, DVS will not only strengthen its focus on air freight forwarding, but will also become the world’s second biggest air freight carrier after DHL. The agreement was reached in the second quarter after months of tug of war.
Increased momentum in the Swiss transport and logistics sector
Pressure on the sector to consolidate continues to grow. In addition to the Panalpina acquisition, there was also the sale of the train logistics company CEVA to the French shipping company CMA CGM. DVS attempted to buy CEVA at the end of last year, but lost out to the target company’s major shareholder CMA CGM, which increased its holding to more than 33% and then took control of almost 100% of the shares via a mandatory offer. However, CEVA, valued at around CHF1.6 billion, is to maintain its independence in the future.
Outlook for the second half of 2019: M&A activity to continue
Given these signs of life in the first half of the year, it can be assumed that the global and Swiss M&A market is out of last year’s trough and heading for a better overall year in 2019, even if the record levels 2017 are likely to remain beyond reach. Targets in the field of infrastructure as well as companies linked to online commerce such as warehouses or courier, express and parcel services continue to be attractive acquisition candidates.
The global M&A market can be expected to strengthen in 2019, though the trade disputes will likely leave their mark. More transactions can also be expected in Switzerland. For example, Kühne + Nagel is entering the market again with small acquisitions, particularly in other European countries. In addition, the continued negotiations on the framework agreement with the EU are likely to have an impact on Switzerland’s economic growth, and thus the logistics sector.
Overall the question arises of how long the momentum in M&A activity will continue. This depends on political developments: if the trade disputes remain unresolved in the second half of 2019 and political uncertainty continues, buyers could become more risk averse again, which could have a negative impact on M&A activity.
Key Takeaways
The M&A activity in Europe and China are slightly decreasing, while the activity in the US are stable despite the trade war. South America already completed as many deals as in the entire year of 2018. M&A activity in the transport and logistics sector picked up again in the first half of the year. The apparent Panalpina deal showed that Swiss companies could also be in the spotlight.
Nevertheless, other actors such as SBB Cargo and numerous medium-sized transport and logistics companies continue to be interesting for the market.
The M&A activities in the Transport and Logistic sector offer a cautiously optimistic outlook for the second half of the year.
