News Releases
CHICAGO, July 20, 2009 – In spite of the disappearance of mega-deals, the volume of M&A activity in the transportation sector remained comparatively strong in 2008, according to a new report released today by BMO Capital Markets, the investment and corporate banking arm of BMO Financial Group (NYSE, TSX: BMO).
The annual study looks at M&A trends in the North American transportation industry.
“Overall, M&A activity for transportation industry service providers remained relatively strong last year with a total of 142 announced transactions, a decrease of only 2 per cent from the number of deals recorded in 2007,” said Edward McGuire, Managing Director in the BMO Capital Markets Transportation Group.
“While the turmoil in the credit markets has affected deal volume particularly in transactions where private equity firms were involved, consolidation in the transportation sector continued as strategic buyers looked to broaden service offerings and expand geographic presence,” said Mr. McGuire.
“Despite market challenges, we are seeing modest deal flow in the transportation sector in the first half of 2009. Deals getting done, however, are characterized by longer time periods for financing and due diligence,” he added.
The BMO Capital Markets report provides an in-depth review of mergers and acquisitions activity among Transportation Industry Service Providers and Automotive Parts Suppliers. The report also offers a summary of valuations and deal volume in the various transportation subsectors including the automotive, logistics, truckload, railroad and marine industries.
Highlights of the report include:
- Seventy-one per cent of transportation buyers in 2008 were strategic, compared with 57 per cent and 74 per cent in the first and second halves of 2007, respectively.
- The logistics sector saw the highest number of M&A deals with 40 per cent in 2008.
- Truckload merger and acquisition activity remained consistent year-over-year, while railway increased to 15 per cent of 2008 deals from only 6 per cent of the announced deals in 2007.
- Overall, the auto parts industry was very active with a total of 63 transactions, led by strategic acquirors, which represented 70 per cent of the volume. The unprecedented slowdown in the U.S. auto industry, triggered by economic conditions and the credit squeeze, led to the fall of the Detroit 3 and even impeded the growth of the Asian transplants. These events continue to drive both consolidation and a rising bankruptcy trend among the North American automotive suppliers.
- While it appears that fuel prices may no longer be an eminent concern, transport companies will continue to face significant challenges into 2009, burdened with low freight volumes and potentially restrictive capital structures. More than 127,000 vehicles, including 39,000 trucks in the third quarter alone, disappeared from the highways in the first nine months of 2008. This 6.5 per cent reduction of the U.S. trucking fleet surpassed the previous record of approximately 117,000 vehicles in 2000.
To request a copy of the Transportation Industry Annual Report, or to subscribe to The Link, the group's monthly transportation industry newsletter, visit www.bmocm.com/industry/us/industrials/transportation
About The BMO Capital Markets Industrials Group
The BMO Capital Markets Industrials Group has a dedicated team of 20 investment and corporate banking professionals that provide industry expertise and product ideas to mid-sized industrial companies. The group's practice is centered on seven specialized subsectors that include: Transportation, industrial products & services, packaging, chemicals, aerospace & defense, plastics and basic materials. To learn more about the BMO Capital Markets Industrials Group, visit www.bmocm.com/industry/us/industrials
About BMO Capital Markets
BMO Capital Markets is a leading full-service North American financial services provider, with over 2,400 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 US$362 billion total assets and 37,000 employees as at April 30, 2009.
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