M&A: Financial Buyers, Niche Players & Two Special Deals

This year’s M&A market was smaller in volume than that of 2005, but also more interesting. With a total volume of around $11.3 billion, the 2006 M&A market falls short of 2005′s $14.4 billion in volume, yet the smaller numbers belie the fact that there are more than 20% more deals in 2006.

The difference can be attributed to a few large transactions in 2005, and also depends on how you cut the numbers. Take away TUI’s $2.3 billion acquisition of CP Ships and AP Moller’s $2.7 billion acquisition of Royal P&O Nedlloyd, both in 2005, and the numbers tell a different story. The story has to do both with a shift in sectors and a growth in consolidating activity among smaller companies. While the name of the game in 2005 was liner consolidation, the big-ticket transactions we witnessed in 2006 tended to be within the rig and infrastructure industries. While many of these deals involve some of the same players as pure shipping deals and are followed in these pages, it does not seem appropriate to count them in shipping M&A volume. The sale of shipping services companies such as Heidenreich Marine, however, are counted based on the idea that the commercial, operational and other services provided by such companies overlap with those some shipping companies provide for themselves and thus their value should be considered a part of the shipping sector.

That said, on the one hand what we saw in 2006 was a proliferation of niche sector M&A deals. A common market perception that vessel values had peaked put pressure on valuations and made many large-scale acquisitions appear less attractive than they would have as vessel values were still rising. The search for value therefore became more focused on sectors like the Jones Act or chemical tanker sectors where regulations or general market conditions protected acquirers from the threat of over supply in the medium term.

This is only an excerpt of M&A: Financial Buyers, Niche Players & Two Special Deals

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