JAKARTA: PwC expects continued M&A activity in the global logistics market after a strong second quarter that produced nine deals valued at US$23.6 billion, almost 69 percent of deal value for the period.
Driven by substantial 'Megadeal' growth (over 36 percent compared to the first three months of 2015), average merger value rose to US$564 million. PwC said the deals were primarily driven by the need to fill a specific need or gap, gain scale, and drive profitability.
PwC cited a recent United Airlines agreement to buy a five percent stake in Brazil-based Azul Airlines SA and IAG's acquisition of Aer Lingus, in order to rapidly expand into a "new geography".
Analysts Jonathan Kletzel and Julian Smith said overall second quarter activity was driven by the trucking and logistics industries that accounted for more than 50 percent of the quarter's overall deal volume. A significant increase in trucking deals drove 28 percent of the total, compared to only 22 percent in the first quarter.
Companies in Asia continued to show the largest M&A activity with more than one-third of all deals. China saw 10 of the region's total of 21 during the second quarter – prompted by continued growth in middle class consumerism and the export-led economy. However "despite a recent drop in value in the Chinese equity markets, the costs of doing business remains high and some foreign investors have refrained from making deals", added the two analysts.
They noted that key drivers for continued M&A activity for the rest of the year include a strong U.S. dollar that makes cross-border acquisitions cheaper against other major currencies; continued middle class growth in emerging economies; and domestic U.S. fuel prices that will average US$2.33 a gallon, a decline of more than 30 percent compared to 2014.