Keep on Truckin’: transport and logistics M&A hits the fast lane

Data InsightDealspeak 4 October

Keep on Truckin’: transport and logistics M&A hits the fast lane

Demand for next-day shipping and expedited delivery skyrocketed during the early days of COVID-19, as the locked-down masses had no choice but to order online. On the back of that, trucking M&A has gone full speed ahead.

Since the start of 2021, US-based trucking and transport logistics companies have been involved in 32 deals worth USD 13.5bn. The last time the sector was this active was in 2015 when 55 deals totaling USD 15.7bn took place.

Private equity firms, sitting on USD 1.9tr of dry powder and currently willing to pay high multiples, have driven much of the deal making. In one recent example last month, The Jordan Company took Echo Global Logistics private for USD 1.3bn, which represented a 54% premium.

Several other transport groups have sold to PE for low-to-mid-teen EBITDA multiples this year. They include Jordan’s acquisition of AIT Worldwide Logistics in March and American Securities USD 1.7bn acquisition of same-day and next-day delivery group LaserShip in April. Transplace also attracted mostly sponsor interest before the logistics platform of Uber Technologies [NYSE:UBER] pre-empted them with a USD 2.25bn bid in July.

Last mile high

Several of these targets had themselves recently purchased last-mile logistics businesses, giving them an in-demand capability that increased their attractiveness. Those included AIT, which last November acquired UK-based Panther Logistics, a fast-service residential delivery specialist, and Transplace’s acquisition of ScanData, whose software tracks service disruptions, a year ago.

Last-mile delivery remains the most inefficient phase in the transportation cycle, with logistics companies needing to figure out how best to deliver to thousands of residences and customers along congested routes. Having the shrewdest last-mile technology became especially critical during the pandemic when shoppers expected Amazon-style next-day fulfillment for every purchase online.

Pullback ahead?

Several transportation and logistics groups have been looking to sell, according to various Mergermarket reports. They include Pilot Freight Services, which boosted its last mile services by buying DSI Logistics in April; CI Capital Partners-backed Redwood Logistics, and Greenbriar Equity Group-backed BDP International.

Yet others could hit the market in the near-term, says a banker. One such is Jordan-backed Odyssey Logistics & Technology, which tried selling in 2019 without striking a deal. Strategic buyers are out there: CH Robinson Worldwide’s [NASDAQ:CHRW] CFO recently spoke about potentially playing a role in the consolidation.

But despite the current frenzy, a pullback could be under way. With rising freight rates have come elevated earnings over the past year, and certain buyers may be concerned these earnings are not sustainable, cautions the banker. “People are wondering if there’s more normalized earnings to go off of rather than a COVID bump,” adds a second banker.

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