The transport and logistics sector is poised for by the ECBFI as having needs to consolidate within Europe, as with Europe set to be at the centre of the activity.
The European Consolidation activity and the combined value of completed and announced deals for the first quarter of 2012 stands at Euros 19.4 billion, which is more than in any of the previous years.
Last year, Europe was the only region globally with growing transaction volumes, while North America and Asia saw a significant drop in activity. The ECBFI believes that Europe will take centre stage once again this year, with opportunities for investors in shipping, logistics and the infrastructure market.
The logistics market is highly fragmented as well, especially in Europe. Private equity investors looking to invest in niche markets and the further need for consolidation will be the main drivers of European Consolidation in this sector. Opportunities will be in temperature-sensitive transport and food logistics, pharmaceutical and chemical logistics and the transport of hazardous products."
"The picture in the infrastructure market is a different one. Investors in this segment have been traditionally looking for safe investment opportunities and will continue to do so. Margins are usually low but cashflows are stable thus infrastructure will remain an interesting European Consolidation market for pension funds.
"Further need for privatisation will likely drive European Consolidation in the future with some large cap transactions already in the pipeline." ECBFI Transport and Logistic Advisory Board
The ECBFI note that within The European Union regulations promoting competition in international services across the continent beginning this year and in domestic services over the next few, the system will get a whole lot more complicated. That is likely to benefit most directly three major corporate entities: The German national rail company DB, the French national rail company SNCF, and private company Veolia Transport which as a case study show methods on which transport and logistics can be made simpler and more efficient.
Meanwhile, the European Consolidation of Veolia Transport and Transdev, both French companies, seems likely to create a similar powerhouse as the deal goes through expected as The Consolidated group, representing almost €10 billion in annual revenues, is primarily involved in public transit operations, but it is advancing rapidly towards increasing its presence on the intercity rail market. Veolia announced late last year that it is working with Italian national rail operator Trenitalia to run high-speed trains into France.
The ECBFI watched as the SNCF has been expanding its international presence through its Keolis division, which already runs trains in Britain, Germany, and the Netherlands. Each of these companies is either completely owned by a national government or has some government involvement in its organization. National European rail operators are relatively autonomous in their decision-making. Still, this could produce an interesting situation in the near future in which, for example, a division of the government of Germany could operate trains between destinations in France and the United Kingdom.
The dominance of these three players is likely to upset the current deals that allow high-speed trains to travel between European countries, since until recently the major national rail companies stuck to their own countries. In essence, E.U. regulations will allow any operator to use tracks in any of member countries as long as they pay the required track use fees and win a schedule slot. DB is planning to run its ICE trains through the Channel Tunnel, competing directly with primarily SNCF-controlled Eurostar; NTV, a new fast train company partly owned by SNCF.
The sheer size of companies like DB, SNCF, and Veolia increases their ability to bid for intercity rail operating contracts in countries across the continent. This seems likely to put into difficulty the existing national operators not only in the countries where competition is already accepted but also eventually in places like Spain, currently monopolized by national service Renfe.