Aftermarket

Improving Economy Means Increased Interest in Acquisitions and Mergers

June 29, 2010

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Business is up, capacity is tightening, and suddenly there's more interest among trucking companies in making acquisitions of other fleets.

One carrier executive who did not wish to be named told HDT he expects to complete at least six acquisitions over the next six months, growing perhaps 30 or 40 percent in the process. He attributed it to a "coming out of the recession" phenomenon,
"where the beleaguered lenders are finally acting on the weakest in their portfolios and forcing action from the deadbeats ... which causes them to run for a safe harbor into the arms of the strongest of the competitors."

Transport Capital Partners Business Expectation Survey for the second quarter of 2010 found that almost half of carriers surveyed are translating optimism for the year ahead into interest in buying another company.

"The present surge of freight and general outlook for improved rates has spiked interest in acquisitions, rising from around mid-thirty percent range by respondents in the prior five quarters to 45 percent now interested," explains Richard Mikes, partner with TCP, which handles transportation mergers and acquisitions, capital sourcing and advisory services.

Last week, New Jersey-based logistics and transportation company NFI announced the acquisition of IPD, a global transportation and logistics company based in Mississauga, Canada, specializing in perishable-based air and ocean transport, intermodal and truck brokerage services.

BIG AND SMALL

Lana Batts, TCP managing partner, notes that according to their survey, carriers of all sizes are interested in buying, but larger carriers are more interested in finding opportunities. Stock values for publicly traded carriers have risen over the past year, reflecting general optimism for transportation firms, though prices have dropped somewhat with the general market recently.

Even though there's more interest in buying, TCP's surveys show that larger carriers have become less interested in selling. "The interest in selling has trended somewhat flat after peaking in February a year ago in the thick of dropping rates and volumes," Mikes said. When asked in February '09 if they had given consideration to leaving the industry if tonnage does not increase in the next six months, over 20 percent of the carriers surveyed said yes. Currently about 20 percent of small carriers are still replying yes to the question, while only 8 percent of the larger carriers are saying yes.

MORE SIGNS

In another sign of increased interest in such deals, another company that deals in transportation merger, Ahern & Associates, this week announced a new service. Its new Financial Feasibility Study offers a third-party perspective on the viability and consequences of selling a trucking or logistics company.

On a global level, last month PricewaterhouseCoopers released first-quarter 2010 figures showing that the pace of deal announcements in the transportation and logistics sector worldwide was strong compared to 2009.

"The positioning of acquirers to engage in deal activity continues to improve, supported by generally higher levels of traffic as well as better liquidity and capital market conditions," said Kenneth Evans, U.S. transportation and logistics leader for PricewaterhouseCoopers. "Rising expectations for economic growth may encourage those acquirers who have remained on the sideline to re-enter the deal market."


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