ROD Industrial Logistics – Valuations


Achieving acquisition success has proven to be very difficult, while various studies have shown that 50% of acquisitions are unsuccessful.

To help our investors make educated decisions and determine the price paid for a business by a  business, we will look at one of the methods to decipher one of the largest acquisitions ever.

helping our investors make wise decisions

The valuation of each transaction depends on the industry in which they operate. There are multiple ways to determine the value of an acquisition based on the information available online.

We would look at M&A model which would answer the following questions:

  • How to understand a stock + cash deal?
  • What does the premium paid mean?
  • How was the value of the deal
    calculated?

Panalpina is among the globally leading providers of end to end supply chain solutions with approximately 14,500 employees in 70 countries with 6bn in annual revenue.

  • Years of service 25
  • Operates in 12 core industries
  • 500 offices worldwide
  • 70 countries
  • The largest perishable player in Latin America

On April 1 st 2019, DSV Group, another big player and Panalpina decided to join forces. Given that part of the advantage of scale in road freight is from having a larger network, it’s clear that DSV would likely build on its existing road division by acquiring a European asset.

  • The enterprise value of the transaction CHF 4.6bn
  • Cost and operation synergies expected CHF 319mn
  • Combined pro forma value CHF 17bn
  • One of the biggest deals in the 3PL bringing them to the second largest in the industry

Panalpina with revenues in excess of 6bn in 2018 an EBITDA margin of 5% was sold at an EV/EBITDA multiple of 28.1x. Let’s have a quick look at their peers to see what’s the industry’s effective EBITDA multiple

At first glance, it may seem like Panalpina was overpriced but bear in mind that Panalpina is a Top 4 Global Freight Forwarding Company.

Similarly, Panalpina had a decent EV/EBITDA for a couple of years prior to when the acquisition talks began. A similar deal came to fruition where, CEVA Logistics having EV/EBITDA multiple of 22.1x acquired by CMA CGM in 2019.

The attractiveness of CEVA can be determined through a variety of factors but EV/EBITDA multiple being 22.1x is one of them and 0.3x EV/Revenue is another.

Now let’s understand the transaction and how it was valued assuming the whole deal was an equity deal: We would need to calculate the following info (2018):

Enterprise value = (Market Cap-Net Debt)

3,110 + 185 = 3,295 mn

Purchase price = 3,295 x 43% Premium = 4,712 mn

To further understand the stock implications

Implied share price = Purchase price / Shares outstanding

4,712 / 24 = 199 per share

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