KPMG: M&A activity set to surge

The first quarter of 2015 has already seen completed global transactions worth £6.7bn, according to the report, and further acquisitions valued at £6.7bn have already been announced. In 2014 the increase in the volume of transactions resulted in £39.6bn worth of deals.

Drivers for the surge include a rise in purchase prices, meaning that the average business valuation of transactions in the transport sector increased in 2014 to 11.9x of EBITDA, compared to 9.0x in 2013. KPMG says this was due to the increase in strategic acquisitions and the increased appetite for takeovers of transport companies combined with low availability of suitable target companies that are for sale, and the trend is set to continue in 2015.

“Total deal values of transport and logistics transactions in 2014 amounted to £39.6bn and we expect this figure to be superseded in 2015,” said James Stamp, UK head of transport, KPMG.

“In addition to high-volume transactions for the purpose of inorganic growth (particularly by US companies as a result of the strength of the US dollar) we expect selective acquisitions of specialised IT and e-commerce companies will increasingly shape the M&A strategies of transport companies,” he added.

KPMG also says the increase in private investment in transport infrastructure operators in the sector will remain a key driver of business transactions. Governments in both emerging and mature markets increasingly “lack the financial flexibility to ensure sufficient investment in infrastructure”, says the report. This increasingly comes from private investors, who are in turn “in search of stable sources of income”.

Transport infrastructure transactions (ports, airports, road operations) amounted to a total value of US$15.1bn in 2014, which is only half of the prior year values but still the second highest value of the past seven years.

According to the report, consolidation, geographical expansion and vertical specialisation remain the predominant reasons for transactions in the sector.