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.