The Transportation, Aviation and Logistic (TAL) sector is currently undergoing various substantive changes. Collectively, these changes are providing opportunities for TAL company boardrooms and their corporate treasuries alike. Ziad Kabbara, Global Sector Head, Transportation, Aviation and Logistics, Global Liquidity and Cash Management at HSBC, outlines some of the ways of seizing and capitalising on these opportunities.
M&A activity, cost base reduction, unfamiliar markets and new technology are just a few of hurdles facing TAL sector treasuries today. Nevertheless, any treasury that surmounts them is also opening the door to multiple opportunities and beneﬁts. Collectively, these hurdles require considerable focus in terms of both cost and available resources, so many TAL treasuries make use of some external assistance to meet their operational workload. This makes a TAL treasury’s choice of partner bank critical to its success in supporting the business with efficient ﬁnancial processes and adequate working capital, as well as seizing the associated opportunities.
M&A activity: implications
M&A activity in the TAL sector has been increasing recently and very substantially in some TAL sub-sectors. For instance, global transportation and logistics saw 284 deals in 2017, representing an increase in volume over 2016 of 18%1. Excess capacity in the transportation (shipping) sub-sector coupled with weak demand and the resulting consolidation were important drivers of this increased M&A activity, with the largest deal during Q2 2017 being for USD6.3bn. The aviation sub-sector (including aerospace and defence) had a record USD72 billion year for M&A deal value in 2017, surpassing the previous record of USD67 billion established in 20152.
M&A activity represents opportunity for the business as a whole, as well as treasury. In the short term it causes an increase in workload for corporate treasury. In some cases, literally hundreds of bank accounts have to be opened and closed, data from ERP and treasury systems have to be consolidated/normalised, numerous authorised signatories have to be changed, liquidity structures need to be revised, all in a short time scale. However, a successfully managed integration process can also deliver numerous longer term benefits, such as streamlined processes and an enhanced working capital position.