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Transport and Logistics Barometer Summary

Core Content

This report provides a comprehensive analysis of M&A deals, joint ventures, and strategic alliances in the transport and logistics (T&L) industry for the full year of 2020, highlighting the impact of the pandemic on different subsectors and the subsequent market dynamics. It also outlines the industry's outlook for 2021 and beyond, focusing on recovery, investment patterns, and the role of government support.

Main Viewpoints

• M&A Activity in 2020:
  A total of 244 M&A deals were announced in the T&L industry in 2020, surpassing the 2018 level but falling short of the 2019 peak. The total deal value reached $84.3 billion, a 42% drop compared to 2019.

  • Average deal value dropped by 28% to $345.6 million.
  • Fewer megadeals were announced (17 in 2020 vs. 21 in 2019), with only one reaching the $4 billion mark.
  • The largest deal was the acquisition of Signature Aviation PLC by Blackstone for $4.29 billion, which is in the passenger transport sector.

• Industry Impact and Recovery Outlook:

  • The passenger transport sector was heavily impacted by the pandemic, with a significant drop in demand and operations.
    • Airlines saw a 58% drop in flights, reaching 1990s levels.
    • Airports also faced severe challenges, with a 65% loss in revenues.
  • Freight transport and logistics were relatively more resilient and showed signs of recovery.
    • The European freight sector is projected to grow by 5.4% in 2021, with a full recovery to pre-crisis levels expected by the end of 2022.
    • The CEP (courier, express, and parcel) sector experienced a real boom due to the surge in online trade.

• Pandemic Effects on M&A Valuation:

  • The pandemic led to a new low in M&A valuation, with the median value/sales multiple for T&L targets dropping to 1.0, the lowest since the financial crisis.
  • Passenger-related targets saw a significant drop in valuation, from 1.3 to 0.7 in 2020, while freight-related targets remained stable.
  • The overall M&A activity was driven by smaller, less risky transactions.

• Strategic Alliances and Collaboration:

  • Strategic alliances in the T&L industry declined sharply in 2020, reaching a new low, far below the financial crisis levels.
  • Codeshare agreements, which were a major component of strategic alliances, have almost disappeared due to the collapse of air travel.
  • Joint ventures and other forms of collaboration are also at their lowest in the past 15 years.

• Investor Behavior and Government Support:

  • The share of deals involving financial investors increased significantly, from 45% in 2019 to 66% in 2020, reflecting the need for liquidity and restructuring.
  • Governments provided extensive support to airlines, including equity injections, loans, and tax concessions, totaling $173 billion as of November 2020.
  • Airlines in North America have heavily relied on the debt market, issuing about $50 billion in bonds and loans in 2020.

• Recovery and Future Trends:

  • The availability of a vaccine is expected to be a turning point for the industry in 2021.
  • IATA forecasts a 50% increase in RPKs (Revenue Passenger Kilometres) for 2021, but recovery in air transport is expected to be slower, with full recovery possibly not happening until 2023/24.
  • The shift in travel behavior is anticipated to affect the demand for leisure travel more than business travel.

Key Information

• Total M&A Deals in 2020: 244, with a total value of $84.3 billion.
• Deal Value Trends:
  • Total deal value dropped by 42% compared to 2019.
  • Average deal value decreased by 28% to $345.6 million.
• Sector-Specific Activity:
  • Logistics & Trucking accounted for 46% of all deals, with a focus on warehousing and cold storage.
  • Passenger transport had 67 deals, down from 95 in 2019, with a focus on cost reduction and liquidity.
  • Freight transport had 177 deals, with a more stable recovery.
• GVA Projections for 2021:
  • European freight transport and logistics sector is expected to grow by 5.4%.
  • Scenario analysis suggests a lower recovery rate of 3.9% in case of an ineffective vaccination rollout.
• CDS Spreads and Default Risk:
  • Default risk for passenger-related operations was significantly higher, with airlines experiencing a median 5-year CDS spread six times higher than the 2019 average.
  • Freight-related operations showed lower default risk, with some sectors even seeing a decrease in perceived risk.

Conclusion

Despite the severe economic impact of the pandemic, the T&L industry showed surprising resilience in M&A activity. While passenger transport remains the most affected sector, freight transport and logistics have been more robust, with a potential for faster recovery. The shift in investment patterns towards financial deals and government support highlights the industry's need for liquidity and restructuring. The outlook for 2021 is cautiously optimistic, with the vaccine rollout expected to drive recovery, though full normalization in air transport may take until 2023/24.