Deal activity dropped significantly during first quarter 2009 in the global transportation and logistics (T&L) industry, according to a report released Monday by PricewaterhouseCoopers LLP (PwC).

Eighteen deals were announced at a disclosed value of at least US$50 million each, down from 43 such deals in fourth quarter 2008.

Activity continued to increase among non-US parties which made up 94% of deal volume for T&L targets in the first quarter, up from 71% in 2007 and 81% in 2008.

Average deal values declined significantly, from US$513 million in 2008 to US$159 million in first quarter 2009 (for deals with a value of at least US$50 million).

In place of large deals worth at least US$1 billion were minority stake purchases, accounting for 39% of deals, up from 30% of the total deals announced in 2008.

“The continued slowdown of M&A activity for the Global T&L sector during the first quarter of 2009 presented interesting changes in behaviour among deal participants,” says Todd Thornton, Canadian T&L sector leader at PwC in Canada. “Most notable is the shift toward minority stake purchases, which can be attributed to tight credit and strategic buyers’ aversion to risk. We expect these factors will lead to minority stake purchases continuing to make up a large percentage of deals announced during the rest of the year.”

“Canadian M&A activity during the first quarter of 2009 was no different then what we saw globally”, Thornton says. “While activity is down, we did see some action in the various sectors. CargoJet Airways’ acquired the remaining 49% interest in Prince Edward Air Ltd. In trucking, we saw purchases by a strategic investor and in rail, Canadian National (CN) Railway sold to GO Transit, the Toronto area commuter rail agency, CN’s Weston division for expanded GO service between Union Station and the regions northwest of the city.”

Passenger air and logistics sectors globally saw the most deal activity in value during first quarter 2009, a change from past years when shipping took the lead. Passenger air accounted for 34% of M&A activity, compared with 17% in 2008 and 27% in 2007. Deal activity for logistics targets also increased over previous years, accounting for 32% of activity during first quarter 2009 compared with 13% in 2008 and 14% in 2007.

IE