2 minute read 21 Jan 2019
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Transportation companies cautious about M&A

By

Kris Ringland

EY Global Advanced Manufacturing & Mobility Transaction Advisory Leader and EY-Parthenon Diversified Industrial Products Leader

Thought leader and advisor in transformational transactions within the advanced manufacturing & mobility industries. Passionate about meeting the disruptive challenges of the future. Team builder.

2 minute read 21 Jan 2019

Heightened risks of disruption and policy uncertainty accelerates portfolio reviews, notes our latest M&A report.

This article is part of our M&A report Global Capital Confidence Barometer, 2nd half 2018.

Our latest Capital Confidence Barometer indicates that transportation executives are solidly optimistic, both about the global economy and the global transactions environment. Ninety-five percent of our respondents say the global economy is improving or stable, and 98% see corporate earnings and the global M&A market as improving or stable.

M&A outlook

98%

of transportation respondents expect the global M&A market to improve or remain stable.

However, deal intentions have slowed, with 36% of survey respondents expecting to pursue acquisitions in the next 12 months — the lowest level in four years. Regulatory, geopolitical and policy uncertainty, and disruptive digital forces have been recognized by executives as headwinds to business growth and dealmaking in the near term.

M&A expectations

36%

of transportation respondents expecting to pursue acquisitions in the next 12 months — the lowest level in four years.

The reduction in deal appetite is more likely a pause than a full stop. We may see fewer deals in the near term, and the next 12 months will likely not be as strong as the last 12. But M&A remains a strategic tool for growth. For now, regulation and trade policy uncertainty is giving some executives pause for thought, as is the need to fully integrate and properly digest acquisitions made to date.

Heightened risks of disruption, increasing policy uncertainty accelerating portfolio reviews

In an era of rapid technological disruption, geopolitical tension and policy uncertainty, transportation executives indicate they are accelerating their portfolio reviews in order to prepare for medium- to long-term growth. Transportation companies have increased the frequency of their portfolio reviews, citing the threat to their business from digitally enabled competitors and startups, as well as increasing pressures from investors to maintain or improve margins. In addition, potential changes to global trade policies are becoming an increasingly pressing issue in company boardrooms.

Transportation companies are planning to sell underperforming or at-risk assets in order to raise capital to invest in the right technologies and right geographies. Executives are looking to identify strategic gaps in their portfolio. Unless these gaps are filled, many companies may find themselves at a competitive disadvantage. Understanding the full breadth of their competitive ecosystem is more critical than ever.

Cross-border deals undeterred by political uncertainty and geopolitical tensions

With global trade and tariff policy becoming more uncertain, transportation executives are still planning cross-border deals to counter negative impacts on their operations, gain access to new markets and protect supply chains. For transportation companies, dealing in a globalized market is a necessity, and executives should remain agile in their approach to geopolitical disruption and be prepared to reimagine their global footprint.

Summary

Transportation executives have confidence in the global economy and M&A outlook, but their deal intentions have slowed for the near term. Download the full report (pdf). 

About this article

By

Kris Ringland

EY Global Advanced Manufacturing & Mobility Transaction Advisory Leader and EY-Parthenon Diversified Industrial Products Leader

Thought leader and advisor in transformational transactions within the advanced manufacturing & mobility industries. Passionate about meeting the disruptive challenges of the future. Team builder.