JOC: Mergers hit nine-year high in 2015, show little signs of slowing …
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Mergers hit nine-year high in 2015, show little signs of slowing
JOC International Logistics Logistics Providers
William B. Cassidy, Senior Editor | Jan 05, 2016 9:56AM EST
Transportation and logistics companies of all sizes felt the urge to merge in 2015, as the number
of deals large and small sent acquisition activity to nearly frenzied levels by year-end. Hardly a
week went by last year without breaking news of a buyout, or new majority shareholder, or a foldin
acquisition in non-asset and asset-based sectors of logistics and transportation. The number of
logistics-related mergers and acquisitions hit a nine-year high in the first nine months of 2015,
according to global research firm PwC US, formerly PricewaterhouseCoopers.
Mergers and acquisitions of all types hit a global record in 2015, topping $4.3 trillion in early
December, according to New York-based financial software company and data provider
Dealogic. Of the top five months on record for global M&A volume, three are from 2015:
November, October and July, it said. Two of the top five months on record are from 2007. Visa s
$23.3 billion acquisition of Visa Europe pushed global M&A volume past the $4 trillion mark in
November, Dealogic said. U.S. merger and acquisition activity passed the $2 trillion mark in
September. The surge shouldn t slow much in 2016. There s plenty of acquisition opportunity, especially for
companies that can take advantage of the strong U.S. dollar. And acquisitions tend to lead to
more acquisitions as companies look to fill gaps in their service portfolios, expand into new
markets and pick up new talent and resources. Acquisitions increasingly are a means of securing
capacity, with non-asset companies buying asset-based firms and asset owners buying nonasset
companies. Asset-right is beginning to replace asset-light, as logistics companies focus
on the risk of land-side capacity shortages.
Broadly, there are two prevalent types of transportation and logistics or T&L acquisitions
under way. One primarily is pursued to consolidate markets and improve profitability, the other to
expand into new markets with new services. Outside the ocean shipping market, most M&A
activity is of the latter type, as logistics companies making money use it to buy other companies,
which hopefully will help them make more money.
U.S.-based XPO Logistics certainly attracted the limelight in 2015 with its $3.5 billion acquisition
of France s Norbert Dentressangle and $3 billion purchase of U.S. transportation and logistics
company Con-way, but companies big and small were shopping and buying and talking about
combining across the global logistics landscape, in corporate conference rooms in Asia and
Europe and over coffee at U.S. truck stops.
There were six T&L mega-deals worth more than $1 billion in the third quarter, PwC US reported,
including Global Logistics Properties $4.6 billion acquisition in July of the U.S. logistics property
portfolio of Industrial Income Trust, which doubled the warehouse provider s footprint in the
country, extending it to 173 million square feet. That made GLP the second-largest U.S. logistics
real estate owner and operator.
PwC reported nine T&L mega-deals in the second quarter, amid 61 transactions worth $50
million or more. At 116 transactions in the first half, the number of T&L mergers and acquisitions
wasn t only higher than the 101 transactions in the same period of 2014, but the value of those
deals also shot up more than 56 percent to $64 billion, the research firm said.
PWC doesn t report on deals worth less than $50 million, but there are plenty, and they re not
insignificant. Some are bolt-on acquisitions, such as ABF Logistics $26 million purchase of nonasset
truckload brokerage Bear Transportation in December. That deal broadened the services
offered by ABF Logistics, a sister company of less-than-truckload carrier ABF Freight. Plano,
Texas-based Bear Transportation is a $120 million company, and the second truckload
brokerage acquired by ABF Logistics last year, following its $5.2 million acquisition of Smart Line
Transportation Group of Oklahoma City last January. The acquisitions fit holding company
Arcbest s strategy to develop its non-asset businesses and extend its portfolio beyond its base in
Another December deal illustrates how one acquisition begets another. Eagan, Minnesota-based
truckload operator Transport America purchased a majority stake in Optimal Freight, a third-party
logistics company in Chicago, adding a non-asset component to its asset-based services.
Transport America, in turn, was acquired for $300 million in 2014 by TransForce, Canada s
largest trucking operator, as the Montreal-based holding company extended its reach into the
U.S. and cross-border truckload freight markets. The surge in acquisition activity is creating a
domino effect across the supply chain, from ocean shipping to railroads to non-asset logistics and
to asset-heavy trucking.
It s tempting to look at this M&A activity as being driven by the same set of factors, but the
reasons for buying and selling differ from one industry or sector to another. In container shipping,
for example, overcapacity and losses are encouraging consolidation that would drive down the
number of carriers, if not eliminate capacity. France s CMA CGM, the world s third-largest carrier
by fleet capacity, reached agreement in December to buy Singapore-based NOL and its APL
shipping division. Just days later, Beijing said the much-anticipated merger of China s two largest
carrier groups Cosco and China Container Shipping Lines was proceeding. Whispers of a
Hanjin Shipping-Hyundai Merchant Marine merger in South Korea haven t ceased, even if talks
between the two have for now. Last March, Hamburg Sud acquired the container business of Chile s CSAV, while Crowley
Maritime completed the purchase of SeaFreight Line, SeaFreight Agencies and SeaPack liner
and logistics companies serving Florida, the Caribbean and South and Central America in
November. In May, Matson acquired Horizon Lines for $469 million, entering the U.S.-flag trade
Unlike the smaller deals, the merger of large companies such as NOL, with its APL subsidiary,
and CMA CGM will shake up the container shipping world, and likely affect the major vesselsharing
alliances. Consolidation is the key issue in this market, which is considered fragmented
compared with rail and air transport. Container lines face a long-term capacity glut, with newer,
bigger ships entering the market, depressing freight rates and profitability.
In the North American rail market, where there are seven Class I railroads, Canadian Pacific in
November made an unsolicited offer of $28 billion for Norfolk Southern, a deal that would create
a 35,500-mile railroad, stretching from Canada s west coast to the Gulf of Mexico and U.S.
Atlantic Seaboard. Consolidation would mean something different for North American railroads
than it would for global container lines, however. Railroads don t have problems with profit and
overcapacity, but they do have problems with service, and the loss of some energy-based traffic.
The goal of any acquisition for CP would be to create a transcontinental railroad with the scale
and reach to deliver improved levels of service to customers and communities while enhancing
competition and creating significant shareholder value, the Canadian railroad said in November.
NS rejected the offer in December, claiming it undervalued the company and any rail merger
would face high regulatory hurdles, but CP is unlikely to give up the fight.
CP s strategy is more like that of the many logistics and trucking companies considering or
completing acquisitions. Those companies are making money, and they re looking to spend it on
In industries where there are thousands of competitors, such as trucking, consolidation has a
different ring than in those where there are fewer than 10 large competitors. The top 100
truckload and LTL carriers had $73.2 billion in combined revenue in 2014, but the for-hire
trucking industry as a whole had about $350 billion in revenue, according to data from SJ
Consulting Group and the American Trucking Associations.
Logistics companies are turning to acquisitions to build scale and open new markets, connecting
services across continents.
XPO is the classic example. Bradley S. Jacobs launched XPO in 2011 by investing $150 million
in Express-1 Expedited Solutions. Since then, Jacobs has made more than a dozen acquisitions,
ranging from freight brokerage and forwarding companies to intermodal rail, contract logistics,
expedited transport and last-mile logistics businesses. Few expected XPO, however, to reach
across the ocean to acquire a global logistics company more than twice its size, in terms of
revenue, and then purchase a major U.S. trucking and logistics operator months later.
Norbert Dentressangle was a $5.5 billion company, with offices in 25 countries and 42,600
employees. Con-way was a $5.8 billion company, the second-largest less-than-truckload
operator in the U.S., with truckload and logistics subsidiaries to boot. In 2014, XPO reported $2.4
billion in revenue. After acquiring Norbert Dentressangle and Con-way, XPO had a $15 billion
revenue run rate and $2.4 billion in gross revenue in the third quarter alone. We believe scale is
imperative in this business to serve customers effectively, Jacobs said in an April interview.
XPO is expected to take a break from major acquisitions in 2016, as it integrates back-office
functions and extends its technology platform across its network of subsidiaries. But in-house,
organic growth alone won t get XPO to the $23 billion revenue target Jacobs set for 2019.
The Con-way acquisition not only gave XPO access to capacity in the U.S. trucking market, but
also provided an opportunity to link European and North American trucking services more closely
than ever attempted. And Menlo Logistics also complements XPO s international logistics
PwC US identified cross-border opportunities in international trade as a driving factor behind T&L
acquisitions in 2015. As XPO moved into Europe, Switzerland s Kuehne + Nagel Group, the
world s second-largest 3PL, acquired ReTrans, a Memphis-based non-asset multimodal
transportation brokerage with more than $500 million in annual revenue. That deal extended
K+N s reach far beyond U.S. ports and into the nation s industrial heartland.
FedEx s $5 billion offer for European parcel carrier TNT Express is expected to proceed when the
European Commission completes its review of the deal, with a decision scheduled to be released
this month. In October, the companies said the European Union s executive body had raised no
objections to the transaction, which would make FedEx the second-largest parcel operator in
Europe, after Deutsche Post DHL.
UPS, the world s largest transportation and logistics company, made the largest acquisition in its
history in 2015, buying non-asset 3PL Coyote Logistics for $1.8 billion. Like the XPO-Con-way
deal, this acquisition underscores the desire for better balance between asset- and non-assetbased
business. UPS didn t just buy a truckload brokerage, but a network integrator.
Basically, Coyote finds available capacity and fills it with freight. That capacity now includes not
just truckload trailers but also UPS trucks and vans. UPS said it runs 7 million empty or partially
empty backhaul legs a year. Using freight sourced from Coyote to fill even a portion of those
empty trucks would save Big Brown big bucks, as much as $150 million a year.
Billon-dollar deals get attention in the media and on Wall Street, but thousands of unsung small
acquisitions are reshaping transportation and logistics markets. These are the deals worth less
than $50 million that don t register with PwC and other companies that track larger transactions.
Trucking has been fertile ground for such deals in recent years, as smaller companies struggling
with higher operating costs sell to larger, better financed competitors. Those transactions may
involve companies with only dozens of trucks or tractor-trailers and comparatively little revenue.
In 2015 and 2014, many truckload carriers, especially Celadon, purchased companies expressly
to acquire qualified truck drivers. Our primary focus over the past couple of years has been to
expand our service offerings to our customers and grow our capacity of seated tractors, Paul
Will, president and CEO, said in May. Celadon has been able to increase its number of drivers
and seated trucks.
Flatbed and specialized trucker Daseke, the fastest-growing trucking company in 2014, grew
rapidly last year by merging with companies that gave it a foothold in new markets, such as
Bulldog Hiway Express in Charleston, South Carolina, and Hornaday Transportation in
Bulldog gave Daseke access to international freight arriving at the Port of Charleston, a new
market for the carrier. Our objective is still to be at a $1 billion run rate in 2016, founder,
President and CEO Don Daseke said. But we will only add companies if they re exceptional
Expect international opportunities to drive many trucking acquisitions in 2016, as they did in
2015. Canadian transportation operators such as TransForce and Dicom Transportation Group
are buying U.S. carriers, while U.S. truckers look for acquisitions that can help them enter or
expand in Mexico. Roadrunner Transportation Systems spent $35 million to buy Stagecoach
Cartage and Distribution, an El Paso, Texas-based company and logistics operator offering overthe-
road truckload and intermodal rail service throughout the Southwestern U.S. and in Mexico.
That acquisition followed the purchase of Active Aero Group and Rich Logistics in 2014, both
companies with Mexican customers. Roadrunner now can offer expedited and regular service
across the border via air, rail and highway. The multimodal approach helps Roadrunner best
utilize the freight capacity put into the field by its network of subsidiaries.
We can cross-utilize our own equipment and resources, take drivers and put them in LTL or
truckload or drayage trucks, and keep them running, Mark DiBlasi, Roadrunner s president, told
The Journal of Commerce last summer. The only difference between his vision and that of XPO s
Jacobs is scale.
Acquisitions and mergers gained speed in 2015 despite a slower-moving economy, as more
profitable businesses put their money to work. M&A activity could slow a bit in 2016, as
businesses digest last year s deals, but don t expect the market dynamics to change much as
long as the U.S. dollar remains strong, oil prices remain low and global growth stays slow. And
once yesterday s acquisitions are integrated, expect logistics and transportation operators with
ready cash to go looking for more.
Contact William B. Cassidy at firstname.lastname@example.org and follow him on Twitter: @wbcassidy_joc.
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