Transport-related mergers and acquisitions are picking up steam in North America, reports Supply Chain Drive magazine.
Nikhil Sathe, managing director of Logisyn Advisors, said the jump in transportation M&A behavior is partly a diversification strategy on the part of major carriers. Diversification within a sector is seen as buffering companies from the ups and downs of a sub-sector, such as LTL, TL or 3PL.
The positive trucking economy and access to capital have carriers looking at a “holistic” strategy for the future, said Sathe, who is seeing heightened M&A activity on both sides of the U.S.-Canadian border.
One thing carriers could be chasing with acquisitions is capacity, suggest the magazine. When buying a carrier, the purchaser gets the trucks, the trailers and, in many cases, the drivers, who are usually in short supply.
Sathe said capacity is just one aspect in a market flush with opportunities.
“Capacity is king, but there’s more at play in the market,” said Sathe, citing diversification desires. And he notes now is the time to strike, when access to capital is there.
“[Private equity] is flush with a lot of cash,” said Sathe.
But even with bags of cash and notes of credit, carriers often wait until a market turns southward, or is long from a peak, before buying, so they can get a better price, according to Avery Vise, FTR vice president of trucking.
Right now, carriers appear to believe the freight market will continue to sustain itself near or at peak levels, meaning it is not yet purely a seller’s market, Vise said. FTR’s research supports the conclusion that the market is far from a peak, Vise said.
As for what the future of transport M&A looks like, Vise said it’s possible more TL firms will buy LTL carriers, and vice versa.
Sathe said the big movement will be in mid-market firms, Sathe said, but it won’t stop there. Carriers and private equity appear to feel the recovery is solid and will sustain itself for a long time.
“We see significant deals in the e-commerce space,” said Sathe. “I have never seen so much money chasing deals.”
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