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More logistics mergers and acquisitions, predicts KPMG

By: Chris Taylor
23 March 2011

Transport and logistics companies should expect more mergers and acquisitions (M&As) in 2011, according to industry experts.

The audit, tax and advisory service, KPMG, has said that during the recession many companies were forced to strip out internal costs.

Now companies will be ready to look at new operational improvements, which will boost the number of M&As.

The predictions made were based on movements in the global logistics industry, but the UK is expected to follow closely. It is thought global mergers could spur on logistics recruitment opportunities, from smaller companies to larger ones.

The Big4 social network for professionals cited KPMG partner, James Stamp, who said: "Strategic M&A will once again become part of Transport and Logistics companies' agendas as consolidation is a significant opportunity - indeed necessity - for many players in the sector.

"Having survived the downturn and emerged leaner, many companies will be switching their focus externally again."

The KPMG analysis shows that earnings before interest and taxes (EBIT) were dampened during the recession with fewer transactions. The average EBIT margins of target companies was up 19 per cent in 2009 compared to 11 per cent in 2007. The average EBIT margin of acquired companies in 2010 fell back to 16 per cent, but it is still higher than the drop two years ago.

"This recovery will once again drive debt backed M&A activity, although corporates may once again face competition from financial buyers for quality assets," said Mr Stamp.

Oil prices, as cited by Logistics Manager, could also affect the recovery of the business say KMPG.
"The potential for oil-price related shocks will be of particular concern to the T&L sector, along with more general concerns about sovereign default, the strength of the global recovery, and the imminent wave of debt re-financings," Mr Stamp added.

It was noted that the first half of 2011 will see major Initial Public Offerings (IPOs) from European companies, Hapag-Lloyd and TNT leading the way.

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