July 2015 | 2nd edition
Transportation Capital Confidence Barometer
Middle-market deals to drive transaction activities in the transportation sector
Our most recent Capital Confidence Barometer survey finds 86% of survey respondents anticipating an improvement in the global economy, a noticeable increase from 40% just six months ago. This improvement is being felt in most economic regions around the globe.
Confidence remains strong in credit availability, corporate earnings and short-term market stability. These positive outlooks are expected to support higher M&A activity in the transportation sector.
This Barometer finds a heavy weighting toward middle-market transactions, those with a value of up to US$250m. In addition, there is a significant focus around increasing investments in new geographies and markets, and the introduction of new products and services. Cost reduction and operational efficiencies continue to weigh heavily on investment decisions.
Our survey indicates political stability as a continuing and primary concern regarding strategy. In addition, concerns around commodity and currency fluctuations are weighing heavily on investment decisions. Also of particular interest is the growing concern regarding cybersecurity and possible threats related to strategy, transaction executions and reputational damage.
Overall, we anticipate the transportation sector will see higher M&A activity, weighted heavily by mid-market size transactions. Our transportation respondents are focused on cross-border investment opportunities, driven by the ease of acquiring in common economic trading areas, with a goal of optimizing returns and performance on the existing portfolio.
Macroeconomic environment: An overwhelmingly positive outlook for the global economy and significant improvement in the confidence around credit availability should combine to support a healthy M&A environment over the next 12 months.
Corporate strategy: Cost reduction continues as a perennial focus, but in a fast-changing world, transportation companies are pursuing innovative growth strategies to improve their market positioning.
M&A outlook: Optimism in the transportation sector — brought about by increasing sales in both developed and emerging markets and a sector-wide drive to decrease costs and improve efficiencies — is motivating increased M&A. A significant number of deals focus on acquiring emergent technologies and cross-border transactions in their immediate region.
About this survey
The Global Capital Confidence Barometer gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their Capital Agendas — EY's framework for strategically managing capital.
It is a regular survey of senior executives from large companies around the world, conducted by the Economist Intelligence Unit (EIU). Our panel comprises select global EY clients and contacts and regular EIU contributors.
In February and March, we surveyed a panel of more than 1,600 executives in 54 countries. More than half were CEOs, CFOs or other C-level executives.
Of the transportation sector companies represented in this survey:
- 12% have revenues greater than US$5b
- 33% have revenues between US$1b–US$4.9b
- 27% have revenues between US$500m–US$999.9m
- 28% have revenues less than US$500m
- 54% are publicly listed
- 39% are privately owned