Is M&A the Right Approach to Growth in Container Shipping?

By Charles de Trenck, Head of Regional Transport, Citigroup Investment Research

I was asked to write on M&A in container shipping. However I unfortunately cannot comment on current specific M&A activities. But I can review the main issues in perspective. The following is a quick thought piece.

M&A in container shipping always has been a tough slog to be sure. Maersk took years to integrate SeaLand, both before and after the official acquisition. NOL also took several years to fully integrate APL, a company ultimately bigger than itself. Failure to properly integrate acquisitions for mid-sized carriers can also lead to the buyer becoming an acquisition target.

At the core of the problem for M&A deals is that often one plus one does not equal two, but something closer to 1.x, with the primary risk being revenues declining faster than costs during downturns. And if a downturn comes on the heels of an acquisition, the risk of going bust rises dramatically because of increased leverage at the wrong point in the cycle.

This is only an excerpt of Is M&A the Right Approach to Growth in Container Shipping?

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