BRIC, MEA markets experience major increases in logistics investment in ‘08
- Monday, 30 November -0001
SIGNIFICANT private investments have been made this year in the Transportation and Logistics (T&L) sector in the Brazil, Russia, India and China (BRIC) and Middle East and African (MEA) markets.
And according to latest research by independent market analyst Datamonitor the sector is likely to experience much higher capital infusion in freight management companies and capacity during the second half of 2008.
The analysis — Transportation and Logistics Financial Deals Insights — predicts the cost savings rationale for M&A deals, particularly by strategic investors, can only increase in the remainder of 2008; albeit with lower valuation multiples compared with those in 2007.
It says financial market trends during 2007, including the tightening of credit and the weakening of the US dollar, bolstered the relative deal-making positions of strategic and foreign investors in the first quarter of this year. As of June 2008, says Datamonitor’s automotive and logistics lead analyst and report author Praveeen Ojha, there are concerns that the US economy is heading into, or already is in a recession.
“This will only increase the number of players in the transportation business up for sale as a potential contraction in economic output will negatively impact demand for transportation and logistics products and services, as well as shippers’ profits during the rest of 2008,” he said.
Ojha said that with financial deals drying up in the first quarter of 2008 because of the credit crunch, the BRIC and MEA markets were witnessing “the introduction of significant private investments”.
“Driven by the strong outbound demand for sea freight and air freight services from the Asia-Pacific, parts of Latin America and the MEA region, private equity funds and firms are turning their attention to both mid-size carriers (in shipping and aviation), as well as participation in port infrastructure development.
After several strong growth years in bulk and containerised shipping, substantial war chests have been developed for mergers and acquisitions and this will only strengthen the consolidation wave in the remainder of 2008,” added Ojha.
