Transportation & Logistics Mergers & Acquisitions During the Pandemic
The Transportation & Logistics (T&L) industry has been one of the more resilient industries during the pandemic. Sure, like all industries, the T&L industry was also impacted during the covid-19 shutdown in the Spring of 2020. However, with the opening up of the economy and the increased growth in eCommerce, the T&L industry was quicker to rebound.
As per Raymond James’ The Executive Freight Trends Insights report, EBITDA Multiples for the T&L industry have improved during the second half of 2020. There were 54 select transactions highlighted in the report, 41 were in the Third-Party Logistics (3PL) sector, 7 were in the Trucking sector and the remaining in the Marine and Rail sector. Acquisitions for warehousing, storage, distribution, and last-mile delivery services were on the rise to better serve growing online shopping demand and improve supply chain operations. This is evidenced by the improving EBITDA Multiples in the 2nd half of 2020.
One of the more active acquirers over the year was Canadian based TFI International Inc. Some of their recently announced acquisitions are – Excel Transportation (represented by Distinct Capital), DLS Logistics, Grammer Logistics (Dry Bulk Business), Keith Hall & Sons, MCT Transportation, Gusgo Transport and most recently, the acquisitions of UPS’s freight business and Fleetway Transport Inc. In fact, TFI has been an active consolidator of Trucking & 3PL companies within North America over the last few years.
Deal Value and Volumes by Sub-Sector
The above chart further validates that M&A activity continued to be robust during the pandemic and will continue to improve post-pandemic. The biggest drivers for M&A in the Transportation & Logistics industry continues to be:
A highly fragmented industry
Generational transfer for privately-owned companies
Growth in eCommerce
Digital transformation
Low-interest rates and very accommodative monetary policy by the central banks
There are multiple M&A strategies employed by companies in the industry with the goal of becoming a dominant and relevant player as the industry continues to evolve. Firms are either:
Pursuing M&A as a way to grow their businesses and increase market share, or
Working to create large networks of shippers and carriers and applying technology to make freight transactions more efficient such as C.H. Robinson, XPO Logistics, or
Attempting to parlay their expertise in freight procurement and distribution management to provide a one-stop-shop for shippers to outsource transportation and logistics services such as Transplace Inc., GlobalTranz Enterprises and Echo Global Logistics, or
Moving aggressively to expand their services to include transportation management, freight brokerage and eCommerce fulfillment services in addition to their specialization in warehousing and distribution, such as Kenco Logistics and DSC Logistics.
Also, investors continue to pour money into the digitization of the T&L industry. For example, Chinese logistics company, Full Truck Alliance is in the midst of a $1.7 billion fundraising round that could value it at $10 billion ahead of a planned IPO next year, according to The Wall Street Journal. Full Truck Alliance operates a tech platform to connect shippers with truckers that is similar to services provided by Uber Freight and Convoy in the US.
About Us:
At Distinct Capital Partners, we have been active in the Transportation and Logistics Industry and understand the nuances of deal-making in this industry. We have strong relationships with both strategic and financial investors in transportation & logistics, especially large companies consolidating in the sector. Distinct Capital just closed a transaction in this space where we were the exclusive advisors to Excel Transportation in its sale to TFI International Inc.
Distinct Capital was engaged by Roy McCullough, the founder and owner of Excel, to assist him with succession planning and to source a potential purchaser who would ensure the continuation of Roy’s legacy built over the past 30 years. Pursuant to its mandate, Distinct Capital identified the purchaser, assisted with due diligence and negotiations to successfully complete the transaction.
Sources:
Executive Freight Trend Insights by Raymond James, December 2020
How Consolidation and Freight Networks Are Disrupting the Logistics Landscape by Transport Topics – April 8, 2019