Global Transportation and Logistics deals insights 2019 recap and 2020 outlook

Executive summary

Boosted by a strong fourth quarter of activity, 2019 saw almost $140 billion of investment in the T&L Sector, an increase of 19% over 2018. Transactions in the Passenger Ground category accounted for 35% of total deal value in the sector and represented four of the top ten transactions of the year.

Cross border deals experienced more than 40% growth in both deal value and volume over last year and almost 50% of transaction targets were in emerging markets compared to 30% in 2018.

Almost 50% of total deal value related to transactions where the target was in Asia and Oceania, while the value of deals with North American targets almost tripled over 2018.

The volume of deals driven by financial investors increased by almost 40% in 2019, although average deal value for these transactions was down by almost 20% from the prior year.

Deal value and volume overview

• Total transaction value in 2019 increased by 19% compared with 2018 and was the highest value recorded since 2015.
• The number of deals greater than or equal to $1 billion dollars this year was the highest since 2013 and concentrated total investment in the sector.
• Average deal size during the second half of the year was $694 million, nearly double the value recorded in the first half.
• The Logistics and Passenger Ground categories continue to drive deal activity and together represented 52% of total deal volume for the year.

Sector category analysis

The Logistics, Passenger Ground, and Shipping categories together accounted for 69% of transactions announced this year. Logistics had the highest number of announced deals this year with 72 transactions, while the Passenger Ground category led transaction value in the sector with total investments reaching $48.6 billion.

In 2019, the Passenger Ground category had 10 deals with transaction value greater than $1 billion, including the largest megadeal announced this year: the pending bid for PLUS Malaysia Bhd, the largest highway concessionary operator in Malaysia, by Widad Business Group for $9.2 billion. Passenger Ground deals with a value greater than $1 billion are centered around acquisitions of highway operators and constructors, some of which are state-owned. Governments are privatizing their operations in order to generate cash flow and reduce debt, and acquirers are interested in these assets as toll roads and highway operations provide a long term steady source of revenue.

The Rail category witnessed an increase in total deal value and volume in 2019 when compared to last year, with increases of 163% and 114%, respectively. Rail investments recorded their highest value since 2013 due to the only megadeal announced within the category: the acquisition of Genesee & Wyoming Inc. for $8.4 billion in Q3 2019, which represented 63% of Rail deal value in 2019.

Passenger Air transaction volume declined by 27% in comparison to 2018, and reached its lowest level since 2013. Despite declining M&A volume, the average deal size increased by 30% over the same period. Additionally in Q4 2019, the category recorded the highest quarterly transaction value since peaking in Q3 2017, reaching $7.6 billion in total investments.

Regional analysis

The Asia & Oceania region was responsible for the highest number of deals both as an acquirer and target region. In 2019, Asia & Oceania accounted for half of the total investment in the sector as an acquirer with $69.8 billion in transaction value.

China continued to drive M&A activity in the region, accounting for 35% of volume as a target and 30% as an acquirer, as the country continues to boost infrastructure projects to counter an economic slowdown and stimulate GDP growth.

North America had investments of $43.4 billion by acquirer region in 2019, a 170% increase over last year, and the highest value recorded since 2013. Local transactions have driven deal activity in North America, which has led to a 266% increase in local deal value in comparison to 2018. Although T&L players around the world, particularly in the Asia & Oceania and North America regions, remain cautious of the impacts of shifting trade policies, ongoing tariff disputes, and increased regulatory scrutiny of foreign investments, the volume of cross border deals increased by almost 40% over 2018.

In 2019, the South America and Europe ex-UK & Eurozone regions experienced the highest deal value growth as an acquirer among all regions. Total investment by the South America region increased by 315% when compared to 2018, while the Europe ex-UK & Eurozone region increased its investments by over 200% over the same period.

A strong Q4-19 capped off a very robust year of M&A in the T&L sector. Deal volume increased 12% while total deal value rose 19% over 2018, representing the highest deal for the sector since 2015. A decrease in activity in the UK & Eurozone was more than offset by a significant increase in deal value in North America during 2019, led by 12 deals with value >$1B.

2019 saw the re-emergence of some of the key growth drivers of deal activity in the T&L sector, including acquisitions in emerging markets, cross border investing and increased interest from the financial investor community, and ended with the highest level of quarterly deal value in the last three years. We believe that despite increased economic and political tensions in the Middle East and elsewhere, M&A activity in the sector will continue to be active, as investors look to capitalize on a diverse range of opportunities generated by the impact of technology disruption across all the T&L subsectors and the continuing re-invention of global supply chains.