M&A Impact on Supply Chain Management is Significant
June 28, 2012
Now, more than ever in the transportation and logistics sectors, a healthy amount of merger & acquisition deal activity is taking place. Companies are making acquisitions based on need or getting into a segment of the business they may not already have a presence in through acquisition.
This was a prevalent theme at an M&A session held at last week’s eyefortransport 3PL Summit in Chicago last week. The session, entitled “Mergers & Acquistions: How to Benefit from the Reality of Industry Consolidation,” was moderated by Ben Gordon, managing director of BG Strategic Advisors and featured on the panel were Doug Waggoner, CEO of Echo Global Logistics, Arthur Barrett, president of Barrett Distribution, Brad Jacobs, CEO of XPO Logistics, and Sid Brown, CEO of NFI.
Moderator Gordon set the table for the session, providing insight on the current state of the M&A market.
“In the last year, we have seen a tremendous amount of activity, which can be segmented into three different buckets,” said Gordon. “There are companies that are very strong in one area like truck brokerage, for example, that have embarked on successful acquisition and growth strategies particularly in the transportation management arena, whether it is truck brokerage, freight forwarding, [intermodal], or something else. The second one has to do with convergence, with, as an example, a warehousing company getting into packaging, and the third one has to do with geographical expansion.”
In his remarks, Echo’s Waggoner said that the environment right now is fairly ripe for consolidations and acquisitions. He explained that Echo has spoken with owners of small freight brokerages that finding it increasingly difficult to compete in today’s market climate, due to a combination of capacity tightening, increasing technology usage and dependence, and small freight brokerages focusing on taking costs out of their businesses.
And despite these challenges, Waggoner said that these small owners want to stay in business but need to be part of a bigger entity in order to keep growing. Echo made its first acquisition in June 2007 and has made a total of 13 M&A deals since then.
XPO’s Jacobs, who led an investor group in assuming control of the former Expedited-1 Solutions, a non-asset-based third party logistics transportation provider in June 2011, and made a $150 million commitment into the business and subsequently re-named the company XPO Logistics, said acquisitions represent a major component of the company’s growth strategy. In May, XPO announced it made its first acquisition, buying Continental Freight Services, a non-asset based 3PL focused on truck brokerage services and based in Columbia, S.C.
And NFI’s Brown echoed Jacobs’s comments to a degree.
“Around 2000, we decided to look at our company in a different way,” he said. “We embarked upon a strategy to grow through organic growth and acquisition. Since that time, we have made 11 acquisitions, with some in the transport area and some in the warehousing area, and some in the brokerage area. We continue to be very active in the M&A area.”
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