Navigating the Storm: Opportunities for Restructuring in Transport & Logistics

Steve J. Tie Shue, Sr. Director, Product Marketing - Legal Advisory

At the start of 2020, the most prominent commercial uncertainties for the transportation and logistics sector were the impact of Brexit and US-Sino trade relations. Today, these business growth apprehensions have been replaced by concerns over the economic impact of a global pandemic, as COVID-19, also known as Coronavirus, sends shockwaves through the segment.

Many countries have introduced travel bans for citizens from affected countries. Local officials around the world are encouraging avoidance of public transport.  And while China may be finally coming out of quarantine, most of the rest of the world is asking residents to remain at home. Many companies are asking their employees not to travel for work, even to work from home outright. Corporate business continuity plans are being rolled out en masse. These actions come as great news for the tele-conferencing industry, but are causing demand—and with that, revenue—to plummet across all segments of the transport and logistics sector.

However, now is not the time to panic. Nor is it the time to bunker down and wait out the storm, however tempting that might be. Industry analysts who have lived through large-scale market disruptions of the past caution against paralysis, instead advising preparation and thoughtful action. Indeed, there remain several positives for the transport and logistics sector that create potential opportunities for shrewd dealmakers, these include:

• Declining costs: Oil prices, a major cost variable, have crashed (due to forces unrelated to the Coronavirus), allowing companies to hedge their future options.
• Significant reserves: The past few years have been characterized by ultra-low interest rates and high cash positions in this sector.
• Fluctuating valuations: While past years saw valuation to sales multiples close to 2.0, the industry saw multiples of 1.1 in 2019.

The combination of these factors, in particular declining valuations, make M&A targets more and more attractive.

Charting a Course

Many companies in this sector may find that the current climate presents a perfect opportunity to restructure a business, or to accelerate restructuring plans that were previously under consideration. It is an ideal time to divest underperforming assets or wind them down anticipating better days in the future. Companies across this sector have begun exploring new approaches to secure loan tranches and refinance debt, and to renegotiate payment privileges.

Whichever course you’re considering, digital technology can help you pursue it more effectively, with less manual effort and risk. Datasite has helped streamline restructuring for transportation and logistics firms for decades through its virtual deal room offering and industry support. Dealmakers in this sector pursuing exit preparedness may find the automated categorization and redaction capabilities of Datasite Prepare to be invaluable. Datasite Diligence can offer powerful permission tools that allow external and internal stakeholders to participate in this process more easily and securely. Datasite Outreach can help organizations explore market interest more effectively, automating manual tasks that otherwise would take hours or days to complete.

As you evaluate restructuring options in the coming months, Datasite can help smooth the path towards the future.