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Exit and Growth Strategies for Middle Market Businesses

Archive for the ‘Transport/Logistics’ Category

M&A News In The Transport, Logistics and Supply Chain Industry

By Peter Heydenrych | Dec 11, 2017

The report below provides a good overview of the fourth quarter M&A activity in the Transport, Logistics and Supply Chain Industry Sector. M&A activity for North American based target companies in the Transportation and Logistics sector for Q3 2017 included 41 closed deals, according to data published by industry data tracker FactSet.

There has been significant consolidation in the supply chain technology sector, which has a substantial impact across the supply chain and logistics sector. Case in point, in September of this year HighJump, a global provider of supply chain management solutions, announced that it acquired Wesupply, a United Kingdom-based premier provider of supplier enablement and B2B integration solutions across multiple industries including retail, building, CPG, energy and manufacturing. With this acquisition, HighJump further expands its global footprint and extends its growing position in the market.
E-commerce giant Amazon continues to be a leader in supply chain and logistics with more than 200 fulfillment centers across the United States.

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Logistics & Transport Industry M&A News | 1st Quarter 2017

By Doug Nix | Apr 15, 2017

Logistics & Transport IndustryAccording to Douglas Nix, Chairman of CFA’s Transportation and Logistics Industry Group, there is a very strong demand for good quality logistics & transport companies of all sizes. Significant bid premiums are being submitted by all categories of strategic buyers in every auction run by CFA.

On a global scale, the shipping of dry bulk containers – across all modes – continues to climb and is projected to continue on an upward trajectory. The growth is expected to be driven by freight rates, ship availability, ship utilization, oil market fundamentals, exchange rates and commodity prices and production.

A recent industry survey reported that the top priorities of North American logistics leaders for their 2017 transportation operations were:

  • Reduce overall transportation costs
  • Improve route planning accuracy
  • Improve the quality and timeliness of management information/reporting

While there are several reasons driving these priorities, we believe the key ones are:

  • The continued shortage of qualified drivers. Many trucking companies are still reporting 100% annual turnover rates in their driver pool. The impact of the Federal Motor Carrier Safety Administration’s electronic logging devices requirement is expected to worsen this shortage as it comes on stream in December 2017.
  • Continued weakness in freight rates resulting from overcapacity in intermodal, water and road markets.
  • The tightening of supply chains combined with the growing demand from shippers for transparency and real time, accurate freight status information. 

Industry Indicators:

  • Total US manufacturers’ shipments, an indicator of the volume of goods shipped by truck, fell 1.5% year-to-date in December 2016 compared to the same period in 2015.
  • Total US revenue for general freight trucking fell 1.4% in the second quarter of 2016 compared to the previous year.

Posted by Doug Nix.

Read the Entire Transport, Logistics and Supply Chain 1st Quarter Newsletter Here


Logistics & Transport M&A News

By Doug Nix | Jan 06, 2017

logistics & transportM&A activity for North American based target companies in the Logistics & Transport sector for Q3 2016 included 55 closed deals, according to data published by industry data tracker FactSet.  The average transaction value was $197 million.

One of the largest deals of the quarter in the Transport & Logistics sector  took place in September when XPO Logistics announced it would acquire Con-way Inc., one of the country’s largest trucking companies, for $3 billion. XPO will launch a tender offer for all of Con-way’s outstanding shares at a cash price of $47.60 per share. All of the divisions under Con-way, which include Con-way Freight, Menlo Logistics, Con-way Truckload and Con-way Multimodal, are expected to be rebranded as XPO Logistics.

Developers of self-driving vehicles are moving closer to delivering technology that could improve safety, increase productivity, and reduce operating costs for trucking companies. Citing potential safety benefits, the US Department of Transportation issued federal policy for testing and deployment of automated vehicles in September 2016. The framework clarifies federal and state roles for the regulation of such vehicles, laying necessary groundwork for companies that plan to deploy self-driving cars and trucks. One such company, Otto, plans to start hauling freight with semi-autonomous vehicles sometime in 2017, according to Reuters. Commercial use of fully automated trucks is likely still many years away, and manufacturers will have to overcome significant challenges, including vehicle technology, inadequate infrastructure, and high development costs. However, Otto’s viability got a boost in August 2016: the company was acquired by Uber for $680 million.

Industry Indicators 

  • The average US retail price for diesel and regular gas, a major operating cost for trucking fleets, fell 2% and 0.9%, respectively, in the week ending October 17, 2016, compared to the same week in 2015.
  • Total US manufacturers’ shipments, an indicator of the volume of goods shipped by truck, fell 2.7% year-to-date in August 2016 compared to the same period in 2015.
  • Total US revenue for general freight trucking fell 1.4% in the second quarter of 2016 compared to the previous year.

Posted by Doug Nix.

Read the Entire Transport, Logistics and Supply Chain 4th Quarter Newsletter Here

 


M&A Trends in the Transport & Logistics Industry

By Doug Nix | Oct 06, 2016

transport & logisticsTransport & Logistics: Trucking industry employment declined for a fifth straight month in June 2016. The freight economy began to soften during the first quarter of 2016 – after an uptick in employment in January, according to the American Trucking Associations (ATA), and driver demand weakened. Total employment for for-hire trucking fell by a noteworthy 6,300 jobs in June, according to a recent Department of Labor Employment Situation Report. Driver turnover rates also declined during the quarter, per the ATA, with turnover at large truckload fleets falling to an annualized rate of 89%. The turnover rate at small truckload carriers – fleets generating less than $30 million in annual revenue – came in at 88% during the same time frame. Turnover at less-than-truckload carriers, a small but growing part of the market, maintained its low rate, falling three points to just 8%.

Expansion by Amazon and other online retailers is boosting demand for warehouses in cities across the US, according to Bloomberg. E-commerce customers are becoming more accustomed to speedy shipping service, thanks in part to Amazon’s emphasis on same-day delivery, requiring retailers to find more warehouse space closer to population centers. The demand for warehouse space in cities is driving up rents: over the past year, prime warehouse rents are up nearly 10% across the US. The increase has been even greater in some large urban areas. Retailers that historically had one or two large warehouses in the middle of the country are now looking for smaller spaces in cities such as Atlanta, Dallas, and Kansas City to cut down their shipping times. Read more »


M&A News in the Transportation & Logistics Industry

By Doug Nix | Jul 07, 2016

transportation & logisticsTransportation & Logistics sector gained steam as the quarter closed.

A growing number of technology companies in the US are setting their sights on streamlining the local trucking industry. Similar to the popular ride-sharing app Uber, new on-demand trucking services connect shippers and local truckers through smartphone apps. By eliminating broker fees and reducing carriers’ reliance on phone conversations, faxes, and emails, such services promise to reduce administrative costs for carriers and make it easier for shippers to quickly find trucks and track shipments on their smartphones. Two companies offering on-demand local trucking apps, Cargomatic and Convoy, have already raised significant funding that should help them expand operations. Cargomatic, which operates in California and New York, raised $8 million in Series A funding in 2015; Convoy, which currently operates in Oregon and Washington, raised $16 million in Series A funding in March 2016. Read more »


M&A News from the Transportation and Logistics Sector

By Doug Nix | Feb 04, 2016

Transportationa and Logistics sectorM&A Trends

Many of the larger companies in the transportation and logistics sector are looking to M&A as a means to grow revenue and expand capabilities. A prime example is FedEx’s 2015 acquisition of 3PL provider Genco, which enabled FedEx to expand its ability to process returns and provide other third-party logistics services.

Industry Update

Companies involved in freight forwarding and logistics are increasingly looking to acquire businesses in other countries to grow sales and remain competitive. In a bid to increase its scale and reach, Danish transport and logistics provider DSV agreed to purchase US-based UTi Worldwide for $1.35 billion in October 2015. The combined companies will have employees in more than 80 countries and a significant presence in Europe, the Middle East, North Africa, and the Americas. Other cross-border deals announced or completed in 2015 include the acquisition of US-based APL Logistics by Japan’s Kintetsu World Express, US-based XPO Logistics’ purchase of Norbert Dentressangle (France), FedEx’s bid for TNT Express (Netherlands), Japan Post’s acquisition of Toll Holdings (Australia), and France Geodis’s purchase of US-based OHL, according to American Shipper. Read more »


Transportation & Logistics M&A News

By Doug Nix | Oct 22, 2015

Logistics 2M&A in the transportation & logistics space continues to be driven by non-asset logistics companies with proprietary technology. A deal that illustrates this is the whopping $1.8 billion cash acquisition of Coyote Logistics, LLC, a portfolio company of Warburg Pincus LLC, by United Parcel Service. The acquisition would allow UPS to expand its portfolio and transportation management services.

Proposed fuel efficiency rules will likely accelerate investment in fleet upgrades by the US trucking industry. Federal transportation and environmental regulators in June 2015 announced new fuel efficiency standards for heavy-duty trucks that aim to cut carbon emissions by 24% by 2027 and reduce oil consumption by 1.8 billion barrels over the lifetimes of the new trucks. Under the new rules, a best-in-class long-haul truck would get about 10 miles per gallon of fuel compared to the 5 to 7 miles today.

Technology companies are attempting to significantly streamline the processes used by shippers to book freight forwarding services. One such company, Freightos, recently received $14 million in Series B funding to expand its offerings, according to TechCrunch. Freightos has developed an online platform that helps forwarders manage their rates and automate their routing and pricing. Shippers can use the platform to receive instant competitive quotes that take into account a wide variety of shipping fees.

  • The average US retail price for diesel and regular gas, a major operating cost for trucking fleets, fell 33.9 percent and 31.3 percent, respectively, in the week ending September 14, 2015, compared to the same week in 2014.
  • According to data from the Interindustry Economic Research Fund, Inc. (IERF), an economic research group, revenue for US truck transportation is forecast to grow at an annual compounded rate of 5% between 2015 and 2019.

Posted by Doug Nix.

Read the Entire Transport, Logistics and Supply Chain 4th Quarter Newsletter Here


Transportation and Logistics M&A News

By Doug Nix | Jul 30, 2015

Warehouse of ProductsThe U.S. economy remains strong, which bodes well for activity in the Transportation and Logistics sector, however, recent turmoil in Greece and further debt obligations faced by Puerto Rico may lead buyers to act more cautious in the second half of the year. Still, all that cash on corporate balance sheets combined with near-record levels of “dry powder” on the private equity side has to be put to work.

US freight forwarding companies continue to increase their investments in Asian countries to benefit from growing US-Asia trade.  By 2030 China is expected to surpass Mexico to become the second-largest US export trading partner, and South Korea is projected to become the fourth-largest market for US exports, according to a report released by HSBC and Oxford Economics in May 2015. Although Canada is expected to remain the top market for US exports, China, India, Malaysia, and Vietnam are forecast to be the fastest-growing markets for US goods, with annual growth of about 9%.

Consolidation has also had a strong effect on freight forwarding.  As non-asset freight forwarders and third-party logistics firms consolidate and expand their service portfolios, smaller players are finding it more difficult than ever to compete. The growth of Internet-based exchanges that can serve small customers puts additional pressure on small, independent brokers. E-commerce growth and expansion of intermodal and LTL trucking transportation are fueling acquisitions among non-asset freight brokers and logistics firms. An example includes the merger of Coyote Logistics and Access America Transport in March 2014, which formed a multimodal company with more than $2 billion in annual revenue.

Posted by Doug Nix.

Read the Entire Transport, Logistics and Supply Chain 3rd Quarter Newsletter Here

 


M&A News in the Transportation Industry

By Doug Nix | Jul 09, 2015

With fuel prices remaining well below their highs many transportation and logistics companies are posting inflated EBITDA results driving up top-line valuations even though multiples for middle market companies remained fixed in the 4x to 6x range. This factor has spurred a variety of would-be sellers to seriously consider an exit before an inevitable rise in fuel prices occurs. From a buyer’s prospective the sector’s historically fragmented composition continues to post a solid landscape for a potential roll-up strategy.

Trucking – US trucking companies are struggling to add enough drivers as the economy improves and freight volumes increase. The employment turnover rate at large truckload fleets was 96 percent in the fourth quarter of 2014, according to the American Trucking Association. Smaller carriers (those with less than $30 million in annual revenue), which typically enjoy much lower turnover, experienced a rate of 95 percent during the same period. High turnover is expected to continue in both segments as they draw from an inadequate pool of qualified workers. The American Trucking Association estimates the current shortage to be between 35,000 and 40,000 drivers. With plummeting crude oil prices driving diesel prices lower, operating costs at trucking companies are falling dramatically. Retail diesel prices in the US, which averaged $3.82 in 2014, hit a four-year low at the end of the year. Prices are expected to average only $3.07 per gallon in 2015, which could result in diesel surcharge savings of as much as $24 billion, according to Bloomberg.

Posted by Doug Nix.

Read the Entire Transport, Logistics and Supply Chain 2nd Quarter Newsletter Here


Transportation and Logistics Sector M&A News

By Doug Nix | Apr 29, 2015

LogisticsM&A activity in the transportation and logistics sector was driven by an increase in trucking deals as larger companies looked to increase market share. Consolidation is being driven by overcapacity in shipping as larger players attempt to reduce competition and create more efficient economies of scale. Looking ahead to 2015, a decline in fuel costs could result in improved profitability and spark increased M&A activity.

According to First Research, an industry research organization, with plummeting crude oil prices driving diesel prices lower, operating costs at trucking companies are falling dramatically. Retail diesel prices in the US, which averaged $3.82 in 2014, hit a four-year low at the end of the year. Prices are expected to average only $3.07 per gallon in 2015, which could result in diesel surcharge savings of as much as $24 billion, according to Bloomberg. Reducing surcharges should free up trucking companies to raise shipping rates, which would help them cover rising salary and health care costs.

High levels of warehouse absorption in the US indicate an increased demand for warehouse space, driven by growing e-commerce activities. More than 160 of the 210 largest US warehouse markets showed positive net absorption – an increase in the amount of warehouse space occupied – in 2013 versus 2012. Overall in those markets, 162.6 million square feet of warehouse space was occupied in 2013, an increase of nearly 40 percent from 2012, according to CoStar. Much of the demand for warehouse space is directly related to e-commerce, a sector that’s growing globally by about 20 percent annually.

Posted by Doug Nix.

Read the Entire Transport, Logistics and Supply Chain 1st Quarter Newsletter Here