Fulfillment/Logistics Trends
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Financial Deals in Transportation Sector: Shipping and Aviation Dominating
Logistics sector in BRIC and Middle East/Africa regions seeing significant private investments, with higher capital infusion in freight management and capacity expected ahead
London — June 20, 2008 — The transportation and logistics (T&L) sector in the Brazil, Russia, India and China (BRIC) and Middle East and African (MEA) markets is witnessing significant private investments in 2008, and the sector is likely to experience much higher capital infusion in freight management companies and capacity during the second half of the year, according to independent market analyst Datamonitor's latest research.
The analysis, "Transportation and Logistics Financial Deals Insights," predicts that the cost savings rationale for mergers and acquisition (M&A) deals, particularly by strategic investors, can only increase in the remainder of 2008; albeit with lower valuation multiples compared to those in 2007.
Financial market trends during 2007, including the tightening of credit and the weakening of the U.S. dollar, bolstered the relative deal-making positions of strategic and foreign investors in the first quarter of 2008. As of June 2008, there are concerns that the U.S. economy is heading into or is in a recession, says Datamonitor automotive and logistics lead analyst and report author Praveen Ojha.
"This will only increase the number of players in the transportation business up for sale as a potential contraction in economic output will negatively impact demand for transportation and logistics products and services, as well as shippers' profits during the rest of 2008," he says.
Shipping and Aviation Dominate Deals
Several themes emerge when examining deals announced during the first quarter of 2008, according to Datamonitor.
First, interest in Western European targets has been high. Second, consolidation of the transportation and logistics sector within China has been a primary driver of BRIC deal volume. Third, deals for shipping and aviation targets have contributed significantly to overall deal value in Q1 2008, as was the case in the second half of 2007. Finally, the tightening of credit markets during 2007 did negatively impact the number of financial deals during the quarter, but the total M&A investment values actually shot up, Ojha says.
"Driven by volatility in capital markets, public offerings and private placements both declined in value and volume terms in Q1 2008," the analyst explains. "Valuation in the T&L sector remained low due to the slowdown in economic activity and high oil prices globally. Overall, increasing scale and adding capabilities remained the key drivers for T&L Financial deals in the first quarter," he says.
In Q1 2008, M&A activity in the T&L sector was driven by consolidation in the marine transportation segment, particularly focused on the container shipping and dry bulk segments. Private equity and strategic investments in the marine infrastructure segment remained high, supported by increasing demand for marine transportation.
The analysis, "Transportation and Logistics Financial Deals Insights," predicts that the cost savings rationale for mergers and acquisition (M&A) deals, particularly by strategic investors, can only increase in the remainder of 2008; albeit with lower valuation multiples compared to those in 2007.
Financial market trends during 2007, including the tightening of credit and the weakening of the U.S. dollar, bolstered the relative deal-making positions of strategic and foreign investors in the first quarter of 2008. As of June 2008, there are concerns that the U.S. economy is heading into or is in a recession, says Datamonitor automotive and logistics lead analyst and report author Praveen Ojha.
"This will only increase the number of players in the transportation business up for sale as a potential contraction in economic output will negatively impact demand for transportation and logistics products and services, as well as shippers' profits during the rest of 2008," he says.
Shipping and Aviation Dominate Deals
Several themes emerge when examining deals announced during the first quarter of 2008, according to Datamonitor.
First, interest in Western European targets has been high. Second, consolidation of the transportation and logistics sector within China has been a primary driver of BRIC deal volume. Third, deals for shipping and aviation targets have contributed significantly to overall deal value in Q1 2008, as was the case in the second half of 2007. Finally, the tightening of credit markets during 2007 did negatively impact the number of financial deals during the quarter, but the total M&A investment values actually shot up, Ojha says.
"Driven by volatility in capital markets, public offerings and private placements both declined in value and volume terms in Q1 2008," the analyst explains. "Valuation in the T&L sector remained low due to the slowdown in economic activity and high oil prices globally. Overall, increasing scale and adding capabilities remained the key drivers for T&L Financial deals in the first quarter," he says.
In Q1 2008, M&A activity in the T&L sector was driven by consolidation in the marine transportation segment, particularly focused on the container shipping and dry bulk segments. Private equity and strategic investments in the marine infrastructure segment remained high, supported by increasing demand for marine transportation.
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