Mergers & Acquisitions
According to Trucking Dive, the transportation industry is experiencing a shift in the mergers and acquisitions (M&A) landscape due to several key factors. Firstly, rising interest rates and a cooling freight market have created an environment conducive to increased M&A activity. After a period of rapid expansion driven by high demand and record rates during the pandemic, many smaller carriers are now struggling financially, especially those that took on debt to expand their fleets.
As these smaller and medium-sized companies face financial challenges, larger carriers with robust financial positions see an opportunity to acquire struggling businesses. Peterson Hawkins from Lilium Group, a private equity firm, describes this situation as a “perfect storm” for acquisitions.
Furthermore, generational trends are influencing the M&A market, with many baby boomer owners of transportation companies seeking to exit their businesses. A lack of succession plans among these carriers is driving the desire to monetize their assets and retire.
Billy Hart, managing partner for M&A consultancy Bluejay Advisors, suggests that the seller’s market peaked in the fourth quarter of 2021. Since then, companies have endured economic uncertainty, supply chain disruptions, and rising interest rates, which have altered the dynamics of acquisitions. However, companies that have weathered these challenges are now preparing to exit the market.
KPMG also supports the notion that M&A activity will increase gradually in the coming quarters, with the second half of 2024 expected to witness a more robust deal market. Scott Heery, a KPMG partner specializing in transportation and manufacturing M&A, notes that trucking executives have been increasingly engaging consultants to explore sale opportunities, indicating growing momentum for a busy 2024.
Despite weak rates and economic challenges, several large carriers, including Schneider National and Hub Group, have expressed their openness to expansion through acquisitions. Hub Group’s President and CEO, Phillip Yeager, mentioned having a strong pipeline of acquisition opportunities, while Schneider National, which recently acquired M&M Transport, remains open to purchasing well-run dedicated contract carriers with a long history and no clear succession plan.