News / Logistics M&A activity in Asia and Australia driving global deal-making in 2016

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Asia and Australia were at the forefront of M&A activity in transport and logistics in the third quarter.

However, according to new research from accountant PwC, the level of consolidation globally remains well behind 2015 levels.

With 28 deals totalling $17.6bn, Asia and Australia accounted for more than half of M&A activity by volume – and, year-to-date, seven of the top ten deals.

“Asia and Australia dominated M&A in the sector in the third quarter, largely driven by infrastructure concessions and participants seeking access to capital,” said Darach Chapman, PwC US transportation and logistics deals leader.

The largest infrastructure concession and deal in the sector this quarter was the investment fund-led acquisition of Port of Melbourne Corp for $7.3bn.

The 50-year concession at Australia’s busiest trade gateway, from the state of Victoria, was acquired by the Lonsdale consortium, a pension fund group comprising mainly Australian, North American and Chinese investors.

Interestingly, despite fronting 20% of the capital, China Investment Corporation’s involvement reportedly took a back seat for fear of jeopardising the bid. Concerns had surfaced a month earlier when the Australian government rejected a Chinese takeover bid for electricity supplier Ausgrid, due to national security considerations.

China features in three of the biggest M&A transport and logistics deals so far in 2016, all in the trucking sector.

Although global M&A activity in transport and logistics has seen more than 50 deals in each quarter, the third was less active and saw 11% less deal volume compared with both Q2 16 and Q3 15.

Overall activity – which includes the sub-sectors of passenger travel, shipping, logistics, trucking and rail – declined 30% in value terms, to $26bn, and consolidation remains well behind 2015, a record year for worldwide M&A activity.

“It appears general uncertainties related to the US presidential elections and the long-term impact of Brexit and China’s economic growth, paired with reduced forecasts of international trade activity, may have impacted recent M&A activity,” PwC said.

As a sub-sector, logistics activity bucked the trend, however, recording a 20% year-on-year increase in deal volume in the third quarter. Deal value grew by more than three times to $4.8bn.

Similarly, Penn State University’s 2017 3PL study, released last month, suggested the value of global 3PL M&A deals nearly doubled from 2014 to 2015, growing to $173bn from $87bn, while cross-border deals more than quadrupled in the same period from $28bn to $115bn.

“Shippers have mixed reviews of the M&A activity, with 27% reporting that added options and versatility within a provider are good for shippers, and 34% saying that they are concerned about reduced competition based on price,” the study says.

According to PwC, M&A activity will continue to be driven by underlying fundamentals such as globalisation, corporate outsourcing of logistics, the global e-commerce boom and the fragmented nature of some industry sub-sectors.

“Further, we expect Asia to continue to be a strong contributor to this M&A activity,” PwC added, “as consolidation of the sector continues in many countries in the region and companies continue to seek access to the capital markets that help them capture these opportunities.”