Trucking Acquisitions Show No Signs of Slowing Down
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The deal market in the trucking industry is heating up as buyers and sellers look to make moves amid a confluence of factors that are driving activity, experts said.
“I would say it’s one of the most active markets within transportation and logistics that I’ve ever seen,” Gaurang Shastri, managing director at investment banking firm Lincoln International, told Transport Topics. “I think it is a function of essentially a perfect storm of events.”
Among those events are high valuations for motor carriers, deals that have piled up during the pandemic and concerns over potential changes to capital gains taxes.
“What we’re seeing across all aspects is significantly higher activity on M&A,” Lee A. Clair, a managing partner at Transportation and Logistics Advisors, told TT, “and that’s for LTL brokers, TL brokers, truck lines, airfreight forwarders, ocean forwarders, managed transportation providers.”
Clair noted that the activity is lifting deal brokers out of a long period of idleness.
“There were very few deals in Q4 of 2019, and then basically a bust in ’20, and then starting off slow in Q1 of ’21,” Clair said,“which gives you a range of six quarters of deals that didn’t happen — that have been in backlog — that is coming through.”
Tenney Group CEO Spencer Tenney said his merger and acquisition advisory firm has onboarded 15 new sell-side engagements since early June, and expects to close seven or eight before year’s end.
“All the stuff that should have happened is now getting pushed into 2021,” Tenney told TT. “Specifically, the second half of 2021.”
Among recent deals, the logistics subsidiary of Cheema Freightlines announced Oct. 5 that it has acquired the assets and operations of Missoula, Mont.-based Walker Logistics. That same day, Andlauer Healthcare Group announced that it had entered into a definitive agreement to acquire T.F. Boyle Transportation. Boyle, in Billerica, Mass., provides specialized transportation services to clients in the life sciences, government and defense sectors.
ArcBest announced Sept. 29 that it entered into a definitive agreement to acquire Chicago-based truckload freight broker MoLo Solutions, and Pilot Freight Services on Sept. 27 acquired franchise stations in the Pacific Northwest and Oklahoma.
ArcBest, in Fort Smith, Ark., ranks No. 15 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
“The market right now, especially the M&A market, is as active as we’ve ever seen it,” Jonathan Britva, principal at investment banking and advisory firm Republic Partners, told TT. “There are a lot of potential deals out in the market right now, both deals that we are advising on and deals that we are not involved with.”
Shastri also credits the backlog to a surge in business his firm has seen. Lincoln International has closed 229 transactions this year as of Oct. 6 with more expected. That compares with 234 last year and 229 in 2019.
The market right now, especially the M&A market, is as active as we’ve ever seen it.
Jonathan Britva, principal at Republic Partners
“What’s really causing this flurry of activity is the fact that you had a number of deals go on hold during the early days of COVID,” Shastri said. “Then the other dynamic is you’ve had deals that would have come to market potentially in 2022 or beyond that were accelerated, given concerns over a potential change in the tax code.”
Britva agreed. “I think you’re seeing market factors and potential legislation factors, and then just the dynamic in the transportation and logistics space of a lack of capacity,” he said.
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Tenney noted that current conditions present a unique window in which high valuations and concerns about potential tax law changes are hitting simultaneously.
“It’ll be difficult to replicate the same valuation environment,” Tenney said. “I think that for companies, specifically companies over that $100 million mark, they’re going to have some pretty unique valuation and exit outcomes.”
Clair added: “Profitability is higher than normal. So if you’re worth a certain multiple on profitability, when profitability is really high it’s a good time to get out. Generally, the volume of deals is a function of how many people are willing to sell. There are always people willing to buy, and it’s just a matter of what valuation it comes out to.”
Tenney noted that while business conditions for some carriers have been difficult during the pandemic, the increased activity has made their businesses more attractive to potential buyers and is driving them to consider selling.
“You may have this issue where you have aging founders that are ultimately looking for some sort of succession planning,” Shastri said. “Instead of waiting for 2022 or 2023, they pulled forward those deals.”
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