Mergers and acquisitions are always going on in the trucking and logistics space. The level of that activity, of course, varies from year to year as market conditions and industry trends change. Some years, M&A activity goes like gangbusters. In others, deal volumes may shrink.  

In the first half of 2022, buyers and sellers enjoyed a robust period of dealmaking. In the second half of the year, though, M&A activity dropped off. Despite that, the fundamental factors that have been driving trucking mergers and acquisitions are still alive and well. That means 2023 has all the markings of being a very good year.  

“A lot of M&A deals got done in 2022, but it was day and night going from the first to the second half of the year,” said Spencer Tenney, CEO of the Tenney Group, during a late-January Truckload Carriers Association webinar on M&A trends. Franklin, Tennessee-based Tenney Group is an M&A firm serving the transportation and logistics industry. 

As Tenney put it, M&A activity galloped along in the first half thanks to a “Wild, Wild West” environment fueled by such key positives as: 

• “Free debt” in terms of extremely low interest rates. 

• The general drive to expand supply chain capabilities. 

• “Once-in-a-lifetime” increases in used-equipment values.  

• That “created all kinds of opportunities for both buyers and sellers to get deals done.” 

Then activity weakened in the second half in the wake of key changes in the marketplace, including driver pay spiking and insurance costs climbing 7.4% over 2021. And equipment values fell sharply — by December, Tenney saw a 21% reduction in values compared to a year earlier. 

What’s more was the beatdown taken from the Fed’s seven interest rate hikes by year’s end. “Those hikes certainly got the attention of the debt and capital markets, especially in Q4. Many deals we were working on went on pause. When you increase the cost of capital that much in one period [Q4 2022], it affects the way people assess risks and how they engage in the M&A market.” 

Yet the urge to merge remained strong, and Tenney said “still a lot of deals got done, even considering 40-year record-high inflation.” 

From Tenney Group’s annual M&A report, here are edited versions of their predictions for this year: 

Valuations normalize and structures evolve. “In 2023, we will likely see a normalizing in valuations. This will be especially true for asset-light businesses.”  

Strategic shift in acquisition target profiles. “Freight volatility influences the way buyers evaluate transaction risks… We expect experienced acquirers to use these next 12 months to diversify their revenue types and to enhance their capabilities through proven winners.” And thanks to “a dramatic increase in first-time acquirers combined with the rising cost of capital, companies available to purchase [that are operating] with 100 or less trucks will attract much more attention than they have in previous years.” 

Higher deal activity but smaller transactions. During the third quarter of last year, Tenney Group accepted more new buyer registration profiles than in any other quarter in company history. “This was during a 40-year inflation peak and after multiple interest rate hikes…the reason for this was that many acquirers that wanted and needed to buy in 2021/2022 believed that market value was overinflated. Consequently, many qualified buyers stayed on the sidelines… Now that performance is normalizing to some degree, we believe the environment will be ideal for buyers and sellers to have a meeting of the minds on value and structure.”  

Also driving activity is the giant generational shift under way. “Aging baby boomer owners with no successor and [who are] averse to taking on more risk present a ‘considerable supply’ of companies to purchase… All other factors point to a very active year of M&A. Challenge headlines that say otherwise.