Skip navigation
Navigation skipped
About BMO

News Releases

BMO Capital Markets Releases Annual M&A Report on the North American Transportation Industry

BMO Capital Markets, the investment and corporate banking arm of BMO Financial Group (NYSE, TSX: BMO), has released its annual report on overall trends in the North American transportation industry for 2006.

The two-volume report provides an in-depth review of mergers and acquisitions and corporate finance activity among Transportation Industry Service Providers and Transportation Equipment Manufacturers. The report also looks at the level of M&A activity in various sub-sectors, including active strategic and financial acquirers and a summary of financial parameters, including valuation metrics.

“Overall, the M&A activity in the transportation industry remained strong in 2006 with a total number of 253 transactions being announced,” said Paul Hawkinson, Managing Director and Head of BMO Capital Markets' Commercial & Industrial Sector Group. “The volume of activity was driven by several secular trends including the continued outsourcing of transportation activities by corporations and the off-shoring of manufacturing activity as corporations moved to lower costs.”

“Private equity players were among the most active in the sector while strategic companies made selective acquisitions to accelerate growth and broaden service offerings,” said Ed McGuire, Managing Director and Head of BMO Capital Markets' Transportation Group.

He added that given current credit market conditions, debt supporting new M&A deals in 2007 may be priced higher and larger deals may be more affected than middle-market deals. “While in the short run deal volume in the transportation sector may cool a bit, in the long run we expect valuations may be impacted only slightly,” said Mr. McGuire. “Our view is that the current market adjustments may be sufficient to wring the excesses out of the market. We think this will result in continued deal volume for the private equity firms, with more competition from strategic buyers.”

Highlights of the report include:

Transportation Industry Service Providers:

  • The logistics sector accounted for almost 50 per cent of the total number of 135 M&A transactions announced in the transportation service sector.
  • Universally, the valuations in the public equity markets for the transportation service providers turned lower in 2006. A combination of weaker freight demand, difficult earnings comparisons and a slowing economy drove valuations in sectors below 2005 levels.
  • Financial performance across most of the sectors continued to show improvement for 2006. However, starting in the third quarter of 2006, the following trends began to have a negative impact on transportation service providers: Weaker freight demand; a slowing economy and difficult post Katrina comparisons.

Transportation Equipment Manufacturers:

  • In 2006, transaction volume in the transportation equipment manufacturing industry was up 40 per cent over 2005 with 118 transactions announced.
  • The aggregate value for transportation equipment manufacturing transactions with reported values in 2006 was about US$15.6-billion.
  • The automotive sector was the most active sector accounting for 61 per cent of announced transactions in 2006.
  • Both strategic and private equity acquirers were active in the transportation equipment manufacturing sector in 2006, accounting for 61 per cent and 30 per cent of transactions, respectively. Overall, private companies accounted for the greatest proportion of acquisitions.

To request a copy of the Transportation Industry Annual Report, or to learn more about BMO Capital Markets' experienced investment and corporate banking transportation team, or to subscribe to the group's monthly transportation industry newsletter The Link, visit www.bmocm.com/industry/transportation

About BMO Capital Markets' Commercial & Industrial Group
BMO Capital Markets' Commercial & Industrial Group has a dedicated team of 33 investment banking professionals that provide industry expertise and product ideas to mid-sized commercial and industrial companies. The group's practice is centered on seven specialized sub-sectors that include: Transportation, capital goods, packaging, other commercial products, chemicals, plastics and basic materials. To learn more about BMO Capital Markets' Commercial & Industrial Group, visit: http://www.bmocm.com/industry/us/commercial/default.aspx.

About BMO Capital Markets
BMO Capital Markets is a leading full-service North American financial services provider, with over 2,000 employees operating in 14 North American offices and 26 worldwide, offering corporate, institutional and government clients access to a complete range of investment and corporate banking products and services. BMO Capital Markets is a member of BMO Financial Group (NYSE, TSX: BMO), one of the largest diversified financial services providers in North America with more than US$336.7-billion in total assets and 35,000 employees as at July 31, 2007. For more information, visit www.bmocm.com.

- 30 -