2007: A busy year for M&A activities in Logistics

Filed in archive Market Overview on July 19, 2007

After the busy 2006 in which there were approximately $7 billion in mergers and acquisition activity in the transportation and logistics market, activity in this space through the first seven months of this year appears to be maintaining that momentum, according to Logistics Management Magazine.

Speaking at the eyefortransport 3PL Summit/Outsourcing Logistics event in Atlanta last month, Ben Gordon, managing director of BG Strategic Advisors, likened the brisk rate of deal making in this sector to a form of "winner take all economics," in which there is a rapid ascension of capital being deployed by private equity and venture capital firms into transportation and logistics companies.

The state of m&a activity in 2007, said Gordon, can best be described as big risks and big rewards, adding that the market is seeing a smaller amount of firms acting as the "big winners" when it comes to these significant transportation and logistics investments.

"There is an advent of capital being poured into the transportation and logistics markets," said Gordon. And this rush of capital is not mode-specific, as Gordon pointed out that there is demand for various types of players, including trucking companies such as US Xpress Enterprises, which recently received a buyout offer from Mountain Lake Acquisition Co.

And that fact that a trucking company is in demand, noted Gordon, is indicative of the type of money that is now available to be deployed into the transportation and logistics sector.

Another driver for m&a activity is steady push of what Gordon described as "service convergence," which is seeing continued capital investments. One example of this convergence was the Jacobson Companies May 2006 acquisition of Wilpak, which combined package services and transportation services. Another example is the PWC Logistics acquiring Geologistics in September 2005 to blend warehousing with freight forwarding.

The third area in which industry consolidation is chugging along, according to Gordon, is its geographic emergence, as is the case with North America-based companies looking to expand into Asia. Schneider National's acquisition of American Overseas-a trucking company buying a freight forwarder-is an example of this. Gordon said this decision by Schneider stemmed from a shift requiring carriers to shift their decision-making processes to the point of origin.