Debt markets crimp private equity deals in transportation sector

Private equity deal activity in the global transportation sector is set for a steep plunge for the first half of 2023, as tight lending markets dampened the interest of sellers.

Investment in the sector amounted to only $600 million across 81 deals in the year to June 13, compared to $11.28 billion across 175 transactions in the first two quarters of 2022, according to S&P Global Market Intelligence data.

In the second quarter to June 13, the sector received about $260 million across 26 deals. By comparison, the total was roughly $8.04 billion across 77 deals during the full second quarter in 2022.

Debt markets drive deal slump

The slumping deal activity underscores the diminishing interest of sellers, Aethlon Capital LLC Vice President Adam Palmer said in emailed comments. He sees a noticeable decline in inquiries from business owners that plan to sell transportation assets and said that those who intend to sell tend to talk about the next two to four years due to conditions in the debt markets.

"Debt markets are the primary driver for the trend," Palmer said. "[T]he lenders have pulled back. They’ve become more risk averse and it’s preventing the buyers from bidding at the same multiples they once had or [from] bidding at all."

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From Jan. 1 to June 13, Europe was the largest recipient of investment in the sector, at $323.6 million. Investment in Asia-Pacific and North America followed with $200 million and $58.7 million, respectively.

Largest transactions in a slow year

Only two of the recorded deals in 2023 thus far were valued at more than $50 million.

A $67.2 million round of funding for Maxi Mobility Spain SL, which operates the ride-sharing service Cabify, marks the year's biggest transaction as of June 13. Orilla Asset Management led the funding round, which included participation from Spanish private equity firm AXIS Participaciones Empresariales SGEIC SA SME and other investors.

Greece-based Instacar SA raised $58.8 million in a funding round comprising both equity and debt. Investors in the series A round included domestic private equity firms Elikonos General Partners and Velocity Partners.