Mergers & acquisitions in Transportation & Logistics

The rise of emerging markets has not gone unnoticed by multinational companies in developed countries. Multinational logistics service providers are already continuously entering these markets. The first moves to emerging markets were generally seen after individual countries underwent liberalisation or opened their markets to foreign investors.

Some phases of industry development already seen in developed markets are likely to be repeated in emerging markets. Looking back several years, the mature logistics industry in developed countries went through a consolidation phase which had a major impact on the industry landscape. After a period of tremendous market growth and continuous market entrance of multinational logistics service providers, the transportation & logistics industry in emerging markets will face a period of fierce competition followed by consolidation.

Our approach, whether buy-side or sell-side, is to work closely with our clients to understand their aims and objectives and to develop an approach to the transaction which is most like to meet those requirements. On the buy-side we would want to establish a clear approach to valuing the business. On the sell-side we give careful consideration to the timetable for a sale to allow time to build a track record and allow proper preparation for the sale.

Of particular importance in any M&A-type activity is maintaining confidentiality and ensuring that the existence of a transaction only becomes public knowledge when appropriate. From a buyer’s perspective it is undesirable to draw competitors' attention to your interest. From a seller's perspective the possibility of a sale can be a big distraction to management and a staff at a time when you want to show the business in the best light.

Empirical studies suggest that many acquisitions fail to deliver the benefits that justified the transactions. We help our clients to undertake due diligence so that they can assess properly the upside in a transaction. We can also help clients implement their plans post acquisition in order to capture economies and deliver the cultural change that typically underpins a successful acquisition.

  • Target search
  • Approaching vendors
  • Valuation
  • Structuring bids and helping obtain financial backing
  • Support for negotiations
  • Market soundings
  • Identification of potential purchasers
  • Preparation of sales documentation and commercial arrangements
  • Evaluating bids
  • Concluding negotiations

Case study: Mergers & acquisitions as a facilitator of industry restructuring

The issue

Patrick Corporation is Australia's largest logistics and stevedoring corporation. Toll Holdings, is one of Australia's biggest trucking outfits, moving 20% of its freight by rail. The two companies formed a consortium to bid on two Australian government-owned rail companies -- National Rail and Freightcorp -- that were put up for sale through a competitive tender process.

National Rail began operations in 1993 and became Australia's biggest interstate freight carrier, hauling about 600,000 containers a year for more than 500 customers. Freightcorp was established in 1996 and at the time of sale was hauling 85 million tonnes of coal, grain, and minerals.

Previously, PwC had been engaged by the New South Wales (NSW) Government, owners of FreightCorp, and the Commonwealth Government (70%), NSW (20%) and Victorian State Governments (10%) owners of national Rail, to advise on the privatisation of the rail companies and had recommended that the governments sell the assets together.

Our approach

PwC was hired by the Patrick/Toll consortium to provide assistance in performing financial and taxation due diligence on the target business, particularly from an industry perspective to ensure that the relevant risks of the rail assets were identified and appropriately modelled. Patrick/Toll also required assistance in building their bid model to ensure that the ultimate bid price would result in a positive outcome for their respective businesses. No merchant bank was involved in the transaction although a boutique advisory did provide strategic advice. In addition, PwC was asked to assist the consortium in developing a strategy to deal with the financiers as Patrick/Toll did not engage an investment bank.