KPMG LLP (UK)

M&A outlook for the

Transport & Logistics sector 2011

KPMG’s analysis of annual trends in the transport and logistics sector highlights the
return of M&A to the boardroom agenda. This is driven by increasing confidence;
more open debt markets; and a structural imperative to consolidate. Our analysis
of the biggest M&A transactions in 2010 shows valuations rebounding strongly as
confidence and competition returns, and as focus shifts from survival to growth.

M&A outlook for the Transport & Logistics sector 2011 / May 2011
© 2011 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative, a Swiss entity. All rights reserved.
 A.1. Valuation levels – KPMG analysed 180 global T&L A.2. Average deal size decreased during crisis, but

transactions of the past four years with focus on showed recovery in 2010

deal multiples

• For the analysis of average deal multiples, we applied the • Average deal value decreased significantly during the
following selection criteria economic crisis until 2009, indicating a trend towards
smaller and less risky transactions.
– Availability of relevant financial information
• In 2010, this trend was broken by an increase in average
– Ability to assign targets to specified segments
deal value of 187.8% symbolising the return to more
– Multiple limits: <10x EV/Sales; <30x EV/EBIT; <40x EV/ courageous transactions in T&L with two landmark
Net income transactions:
These selection criteria left us with 180 M&A – Remaining 78.07% of Burlington Northern Santa Fe
transactions over a period of four years for our analysis. acquired by Berkshire Hathaway for a consideration of
USD 36.7bn
• The analysis showed a similar development of the valuation
levels compared to the overall development of deal value – 100 % of Continental Airlines acquired by UAL Corp
and deal numbers in T&L over the reviewed period. (United Air Lines Corp) for a consideration of USD 3.7bn.
• Following the decrease of valuation levels from 2007 to • This development stands in contrast to the general M&A
2009, the level rose in 2010. Nevertheless recovery was activity which decreased by 3.1%.
not as significant as recovery of deal values and number of
deals in 2010 was. This observation might be an indicator
for the bidders’ higher leverage in price negotiations with
the targets, especially when considering the still unsteady
economic conditions.
• Only exception to the aforesaid observations is the EV/
sales multiple development, which remained relatively
steady over the last four years.

Graph 1: Average EV multiples of selected T&L transactions Graph 3: Global M&A activity – T&L
20x 90 84.25 1,200
16.3x 80 74.56 985
1,000
14.4x 13.8x 70 65.31
15x 13.0x 792
12.2x
EV/Multiples

60 800

Deals
922 892
US$bn

10.9x
9.9x 50
10x 8.2x +224% 600
40
30 25.99 400
5x 20
1.3x 1.6x 1.3x 1.4x 200
10
0x 0 0
EV/Sales EV/EBIT EV/Inco me 2007 2008 2009 2010

2007 2008 2009 2010 Deal volume (US$bn) worldwide Number of deals worldwide

Graph 2: Average performance indicators of selected T&L transactions Graph 4: Global M&A activity – overall
1,400 19% 20% 4,500 40,000
36,447
1,179 18% 34,845
1,200 4,000 35,000
15% 16% 16% 30,067
1,006 3,500 3,925.39
1,000 893 30,000
14% 31,005
EBIT margin

3,000
Deals
US$bn

11% 734 12% 25,000

800 2,500 2,844.89
US$m

10% 20,000
600 2,000
8% 15,000
6% 1,500 1,776.67 1,774.81
400
1,000 10,000
4%
200 92 125
63 37 2% 500 5,000
0 0% 0 0
2007 2008 2009 2010 2007 2008 2009 2010

Avg. sales Avg. EBIT AVG EBIT margin Deal volume (US$bn) worldwide Number of deals worldwide

Graph 5: Global T&L – average deal value *

100 94.45 200%

90 80.87 187.80%
80 150%
66.31
70
y-o-y growth

100%
US$m

60
50 50%
40 32.82
30 (18.01%) 0%
(50.51%)
20 (50%)
10
0 (100%)
2007 2008 2009 2010

Average deal volume (US$m) worldwide y-o-y growth

* 2010 average deal values are somewhat distorted by the very

2 | M&A outlook for the Transport & Logistics sector 2011 / May 2011 large Burlington Northern Santa Fe transaction

© 2011 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative, a Swiss entity. All rights reserved.
 A.3. M&A activity in T&L varied significantly between A.4. M&A activity in T&L from 2007 to 2010 is
the three major regions of the world characterised by a sharp downturn, followed by
an overshooting rebound in 2010

When analysing the deal value of the three major regions of Previous analyses and historical data suggest a strong
the world, EMEA, Americas and APAC, it becomes apparent, correlation between deal activity in the T&L sector and global
that there are significant variations in the nature and GDP. This is mainly due to the essential influence that the
dynamics of the respective T&L M&A markets. world economy has on the T&L sector itself. Given the global
economic crisis of the past years, one would expect the deal
activity in T&L to follow suit. KPMG’s research has indicated
exactly this effect.

Graph 6: T&L deal values by region Graph 8: y-o-y GDP growth of selected countries

60 14.0%
49.0 12.0%
50
Deal volume in US$bn

y-o-y GDP growth in %

10.0%
40 37.0 35.2 8.0%
6.0%
30 4.0%
22.0
15.9 2.0%
20 14.0 13.9
10.6 11.1 9.8 10.4 0.0%
10 (2.0%)
3.6
(4.0%)
0 (6.0%)
2007 2008 2009 2010 2007 2008 2009 2010e 2011e

EMEA Americas APAC

China India Brazil United States EU

Graph 7: Number of T&L deals by region

600
500
500 458
Number of deals

410 401
400

300 244
209
200 170 179
189 187
147 167
100

0
2007 2008 2009 2010

EMEA Americas APAC

May 2011 / M&A outlook for the Transport & Logistics sector 2011 | 3

© 2011 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative, a Swiss entity. All rights reserved.
 Our analysis of
“

the biggest M&A

transactions in 2010
shows valuations
rebounding strongly
as confidence and
competition returns,
and as focus shifts
from survival to
growth.

Contact us
For further information please contact:

Katrin Boettger
KPMG Corporate Communications
T: +44 (0)20 7896 4232
E: katrin.boettger@kpmg.co.uk

Dr Steffen Wagner
KPMG’s Head of European Transport
Corporate Finance/M&A
T: +49 69 9587 1507
E: steffenwagner@kpmg.com

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or
entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate
as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate
professional advice after a thorough examination of the particular situation.

© 2011 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.

www.kpmg.co.uk RR Donnelley I RRD-254151 I May 2011