MUMBAI (Commodity Online): If Warren Buffet, the world's most famous and successful investor makes an entry into a new sector, it is eagerly watched the world over. So was his decision in November, 2009 to acquire Texas-based railroad company Burlington Northern Santa Fe for US $26 bn in an all cash transaction. At the time of acquisition, Buffet commented, "Transportation is fundamental. And there's lot of money to be made."

No wonder, the transporation industry is seeing a steady growth in private equtiy investments, mergers and acquisitions with 600 reported deals since 2005 amounting to $79 bn. In India too, the wave of mergers and acquisitions are climbing in logistics sector.

Nobody doubts that the deal activity has picked up significantly in India since last year and is expected to edge higher towards the end of this year. "It will probably not touch 2007 levels but it will certainly approach it", said Manish Saigal, Executive Director & Head - Transportation & Logistics, KPMG India. "Deal activity in logistics had not been significantly hit by the slowdown in 2009 over 2008, though ticket sizes had dipped from an average of USD 46m to USD 27m. A strong bounce back in M&A is expected in the current fiscal", Manish attending the Supply Chain Leadership Council's 'Private Equity, Mergers and Acquisitions in Logistics Summit' last week in Mumbai said.



Ashit Desai, Executive Director, AllCargo Global, one of India's largest integrated logistics companies listed on the BSE and the NSE explained, "Acquisitions are a critical part of AllCargo's growth strategy". He further added, "AllCargo has successfully acquired and integrated several companies including multiple acquisitions abroad while multiple others were being negotiated".
Vishal Sharma, MD & CEO of Tuscan Ventures, said that the past few months have changed the fundamentals of private equity investing and that India is no different. Investment models will increasingly lean towards performance based valuations and structures that will give funds several options to cut losses at every stage of an investment. Also, large sector agnostic funds will increasingly co-invest with smaller, sector focused and operationally driven funds to have a greater handle on their exposures.

Vikram Utam Singh, Executive Director & Head - Markets & PE, KPMG advised logistics promoters to strictly evaluate their PE readiness and chance for success (according to him, only 3 deals out of 100 actually conclude) on key parameters of scale, management bandwidth, transparency and exit potential before jumping on the PE bandwagon.

"The mood and the buzz at the conference were unambiguously evident of that the deal makers and promoters mean business and the cheque books are back in the front pockets. The Indian logistics sector seems to have turned one more corner", said Gautami Seksaria, Founder & Partner, Supply Chain Leadership Council. (IndiaPRWire)

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