A flurry of recent investments and merger and acquisition activity suggests 2018 could be an active year for purchases in third-party logistics and for technology firms that provide usable data and an open view of the supply chain.
And buyers have money to spend.
“There is billions in dry powder in the market seeking light-asset and non-asset firms,” said Nikhil Sathe, managing director of the mergers and acquisitions advisory practice at Armstrong & Associates. “There’s a lot of velocity in mergers and acquisitions going forward. We have consolidation and strategic buyers buying organizations and bigger firms doing tuck-in and bolt-on purchases” where a larger firm absorbs a smaller one or adds a company that continues to operate independently.
Milwaukee-based Armstrong is a market research firm covering the third-party logistics market.
“Private equity is looking at the light-asset side,” said Satish Jindel, president of SJ Consulting Group in Sewickley, Pa. “E-commerce is very attractive. Many want to be in that space with many new smaller startups [receiving capital from] venture investors.”
That interest was born out when several venture capital firms recently put a total of $100 million into two firms that upgrade the way data is used to ensure driver compliance, monitor vehicles and make fleet operations more efficient.
KeepTruckin, a provider of electronic logging devices and GPS systems, raised $50 million in an investment round led by IVP and several existing investors. And San Francisco-based Samsara Inc., raised $50 million from Andreesen Horowitz and General Catalyst. Samsara’s technology platform uses wireless sensors to provide information on GPS location, vehicle diagnostics, ELD compliance and trailer tracking to fleets.
Investors favor ELD-related providers because of the information the technology generates on loads and drivers, said Mary Holcomb, professor of supply chain management at the University of Tennessee.
“The ELD will change things, due to the data on hauling, what it takes to move a load, which lanes are good, which can improve. [Carriers] use that data to operate more efficiently,” Holcomb said.
KeepTruckin via YouTube
“M&A in the supply chain will be tech-oriented,” said Holcomb, noting that the prime goal for potential buyers is better visibility of supply chain activity.
“Shippers are looking for a bigger view than point-to-point. They want a broader perspective to the supply chain that will make it more seamless,” Holcomb said.
That should make FourKites Inc., Descartes Systems Group’s MacroPoint and project44 attractive buyout targets, as all are firms with technology designed to improve supply chain visibility, analyze pertinent data and speed connections between shippers and 3PLs, Holcomb said.
She predicted a firm such as SAP SE or Oracle Corp., huge global providers of Electronic Resource Planning systems, will consider buying one of these firms to expand their product suite in the supply chain sector.
Meanwhile, some investors are looking for proven 3PL providers.
Private equity firm Greenbriar Equity Group recently purchased LaserShip Inc., a Vienna, Va.-based regional parcel carrier service of same-day and next-day delivery services for online merchants. LaserShip operates in 22 Eastern and Midwestern states.
Chicago-based St. George Logistics and its parent Wind Point Partners made two acquisitions in March for undisclosed prices.
They bought Summit Northwest, an import/export logistics firm serving Seattle-Tacoma, Portland, Ore., and Vancouver, British Columbia. And the two purchased Freight Force, an operator of a network of independent carriers serving more than 2,200 freight forwarders and other 3PL firms.
However, asset-heavy purchases are looking to be smaller tuck-ins that will expand geography or other competitive needs for larger carriers, according to the experts.
There are interested sellers as “there are quite a few privately-owned (fleets) where the owner wants to retire, or get a great price,” Jindel said.
But buyers are hesitant due to the driver shortage, Holcomb said. “They can add capacity but they don’t have enough drivers to handle all the freight,” she said.
Recent purchases include Phoenix-based Knight-Swift Transportation Holdings paying an undisclosed price for privately held Abilene Motor Express. Richmond, Va.-based Abilene’s fleet consists of 400 tractors, 1,000 dry vans and 275 refrigerated trailers.
And Challenger Motor Freight purchased the assets of flatbed and dry van truckload carrier Ed Wiersma Trucking of Kitchener, Ontario, for an undisclosed price. Parent company Challenger Group ranks No. 89 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
Merger and acquisition activity this year is reflecting the mood of the trucking industry. Technology is top of mind, 3PL firms keep growing and carriers steam ahead.