Transportation and Logistics

High Growth Sector for M&A

The transportation and logistics (“T&L”) sector is experiencing substantial growth in global M&A activity.  This sector had a strong Q1 2016, and activity increased in Q2.  By volume, the number of deals in Q2 was 6% greater than Q1.  The average deal value was also high during Q2 at almost US$670 million, and compared to Q1, was 20% higher.  Over the past few years, deal value for this sector has been steadily increasing. The average deal value in 2016 is 25% higher than the average for the past three years.

A major factor in the consistent increase in T&L activity is the current high level of M&A activity in Asia, in general, an in China, in particular.  Asia has been a leader in this sector for deals over the past few years.  As seen in the charts below, for the first half of 2016, Asia maintained a strong lead over other regions, in both deal value and volume, accounting for more than 50% of both measures.  Additionally, in terms of both volume and value, financial buyers lag far behind strategic buyers in completing T&L mergers and acquisitions.  Many of the companies within the T&L sector are looking to diversify across sub-sectors, which has also caused an increase in M&A demand from industry buyers.

During the first half of 2016, there were five mega deals completed in transportation and logistics, which totaled US$26.7 billion.  The largest deal within the T&L sector was in the trucking sub-sector.  Deal value in trucking increased 69% in Q2 2016, as compared to the same quarter in the previous year.  In Q2 2016, Logistics was the second largest sub-sector, followed by shipping, with deal values of US$5.8 billion and US$923 million, respectively.  Overall, the largest transaction during the first half of 2016 was Maanshan Dingtai Rare Earth & New Materials Co.’s acquisition of SF Holding Co. for US$16.8 billion.

Worldwide, mergers and acquisitions in the transportation and logistics sector is expected to continue growing.  Corporations are currently seeking to outsource logistics that are heavily based in advanced technology.  The expansion of world trade and e-commerce will continue to drive this demand.  All in all, global M&A activity in the transportation and logistics sector should remain strong for at least the next five years and many are confident the activity will continue to grow across all sub-sectors.  T&L merger and acquisitions activity in the US is also expected to increase.

Versailles Group is a 30-year-old Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures.  Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies with revenues between US$2 million and US$250 million.  Versailles Group has closed transactions in all economic environments, literally around the world.

Versailles Group provides clients with both buy-side and sell-side M&A services, and has been completing cross-border transactions since its founding in 1987.  

More information on Versailles Group, Ltd. can be found at www.versaillesgroup.com.

For additional information, please contact

Donald Grava

Founder and President

+617-449-3325

September 23, 2016

China becomes the largest investor in Brazil

As one of the BRIC countries, Brazil was projected to continue to be one of the fastest growing economies in the world.  However, the 2015 recession in Brazil resulted in a negative growth rate of 3.8%.  As a result, Brazil slid from seventh to ninth place in the world economies ranking. 

Year-to-date, Chinese companies have already purchased US$4 billion of assets in Brazil, the highest level since 2010.   According to Bloomberg, the top five countries investing in Brazil are China - 1^st, US – 2nd, Norway – 3rd, Mexico 4th, UK – 5^th.

The Brazilian currency, the Real, has depreciated more than 50%, which has enhanced Chinese and US purchasing power in terms of investment.  It’s also important to note that as compared to the US, China has experienced less political resistance when acquiring Brazilian assets.

Some notable transactions where Chinese companies made acquisitions in Brazil: 

China Investment Corp., which has a US$814 billion sovereign fund, is leading a Chinese investor group that is in talks to complete a multibillion-dollar iron-ore streaming deal with Brazil’s Vale SA.  The consortium is negotiating the potential purchase of a portion of Vale’s future iron-ore output for as long as 30 years.  Vale could fetch about US$9 billion upfront from the sale.

State Grid Corp of China, the world’s largest electricity provider by revenue, is wooing shareholders of Brazil’s CPFL Energia SA and a listed subsidiary.  It expects to secure stakes from large shareholders before making an offer for the entire company.

The Fosun Group, a major China-based investment group, with operations in several countries, signed an agreement to acquire Rio Bravo Investimentos.

Shanghai Pengxin Group Co. purchased control of Brazilian grains trader Fiagril.  People familiar with the deal said the value of the deal could be around 1 billion Reais (US$290 million).  Shanghai Pengzin, like most foreign buyers would keep current management in place. 

Versailles Group is a 30-year-old Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures.  Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies with revenues between US$2 million and US$250 million.  Versailles Group has closed transactions in all economic environments, literally around the world.

Versailles Group provides clients with both buy-side and sell-side M&A services, and has been completing cross-border transactions since its founding in 1987.  

More information on Versailles Group, Ltd. can be found at www.versaillesgroup.com.

For additional information, please contact

Donald Grava

Founder and President

+617-449-3325

September 19, 2016

M&A Activity in Western Europe

First Half of 2016

While the US and China receive the most media attention for M&A activity, Western Europe should not be overlooked.  The charts below reflect the deal volume and value breakdowns for the Western European countries.

In terms of the number of deals completed in Western Europe, the two countries that have seen the highest activity are the United Kingdom and Germany.  On a global level, these countries also rank well, and are usually within the top five countries for highest deal volume.  The UK significantly outpaced German deals in the first half of 2016, closing almost 50% more transactions.  It should be noted that Germany is completing significantly more deals in 2016 than they did in 2015.  The chart below reflects the top five Western European countries with the greatest deal volume.

By deal value, the UK is still the leader in Western Europe for the first half of 2016 with their transactions totaling US$119,342MM.  Surprisingly, despite its high volume of deals, Germany does not hold second place for deal value, but rather drops down to fourth.  Switzerland has more than doubled its deal value as compared to the same time period in 2015, and holds second place in Western Europe.  For the first half of 2016 Switzerland completed US$66,276MM in deals, as compared to the same period in 2015 when they had completed US$31,663MM.  Shown in the chart below are the leading Western European countries with the highest deal value.

Post Brexit many have their eye on Western European M&A deals.  It is expected that as the British Pound fluctuates against other currencies, so will the number of transactions between countries.  While Brexit may help firms in the United States expand abroad at a reasonable price, overall deal activity within the UK is uncertain for the second half of 2016.  Many believe the deal volume will fall, however some economists are optimistic about deal flow and predict it to pick up during the remainder of the year.

Versailles Group is a 30-year-old Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures.  Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies with revenues between US$2 million and US$250 million.  Versailles Group has closed transactions in all economic environments, literally around the world.

Versailles Group provides clients with both buy-side and sell-side M&A services, and has been completing cross-border transactions since its founding in 1987.  

More information on Versailles Group, Ltd. can be found at www.versaillesgroup.com.

For additional information, please contact

Donald Grava

Founder and President

+617-449-3325

September 15, 2016

China - M&A Lending

China recently made changes to its government policies, encouraging Chinese companies to expand abroad.  Domestic banks are adapting to the policy changes by prioritizing M&A lending.  As a result, companies are able to easily obtain loans for acquisitions.  For example, China CITIC Bank International made a US$12.7 billion loan in June allowing China National Chemical Corp. to purchase Syngenta AG.  Many similar deals have recently been completed thanks to readily available financing. 

Previously, only top tier Chinese banks would engage in cross-border M&A; however, second tier banks are now aggressively lending.  As banks work hard to increase deal volume, Chinese banks are expected to improve their ranking for financing M&A transactions.  Bank of China is currently ranked 20th in global M&A lending.  In order to facilitate M&A transactions, Chinese banks are starting to establish overseas branches which will make the M&A process more convenient for its clients.  These banks are more capable than ever to move quickly in cross boarder deals and Chinese companies that are backed by state lenders have been extremely active in closing cross boarder deals.

While policy changes have made a positive impact, they are not the only factor driving Chinese cross-border M&A.  Investment opportunities in China are becoming harder to find.  The country’s economic expansion is slowing and domestic companies are looking abroad to diversify and meet growth objectives.  Large companies in particular have found limited opportunities for acquisitions within China.  Additionally, by making foreign acquisitions, companies have been able to expand trade and move into new markets.  Most companies in the market for acquisitions are searching for well-known brands and advanced technology.

Versailles Group is a 30-year-old Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures.  Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies with revenues between US$2 million and US$250 million.  Versailles Group has closed transactions in all economic environments, literally around the world.

Versailles Group provides clients with both buy-side and sell-side M&A services, and has been completing cross-border transactions since its founding in 1987.  

More information on Versailles Group, Ltd. can be found at www.versaillesgroup.com.

For additional information, please contact

Donald Grava

Founder and President

+617-449-3325

September 2, 2016