CEO of the Tenney Group, Spencer Tenney, said during a Jan. 26 Truckload Carriers Association webinar that M&A activity galloped along in the first half of 2022 due to “free debt” and increased supply chain capabilities. However, in the second half, driver pay, insurance costs, and equipment values increased, and the Fed’s seven interest rate hikes by year’s end took a toll.
Tenney explained that hikes in Q4 2022 “got the attention of the debt and capital markets” and “many deals went on pause,” as “it affects the way people assess risks and how they engage in the M&A market.”
The Drive to Merge
The urge to merge remained strong despite high inflation in 2022, with foreign investments such as Berger Logistik (Austria) acquiring Super-T Transport and DB Schenker (Germany) acquiring USA Truck. Tenney Group released an annual M&A report focusing on companies with annual revenue of $20-$300 million and discussed predictions of the state of play in M&A in 2023.
Valuations and structures will likely normalize in 2023, primarily for asset-light businesses, which have experienced seven straight years of increased values. Per Price Waterhouse Cooper, “fundamental factors driving high M&A activity are still alive and well.” To maximize outcomes, buyers and sellers must consider new and evolving risks in the market.
A strategic shift in acquisition target profiles
Experienced industry acquirers are modifying their target profiles for 2023 to diversify revenue and enhance capabilities. Regional players are reducing floor size and pursuing “tuck-in acquisitions” to offset growth limitations. The rising cost of capital and increase in first-time acquirers means companies with 100 or fewer trucks will attract more attention than in past years.
Tenney Group accepted more buyer registration profiles in Q3 ’22 than in any other quarter due to inflation and interest rate hikes. Potential sellers are delayed exiting due to record profits while aging baby boomer owners with no successor provide ample companies to purchase. This indicates an active year of M&A, challenging headlines that say otherwise.
Schneider buys Midwest Logistics Systems; Christenson Transportation acquires Sharp Transport; Ascend acquires Carrier DTS, Fuchs Trucking, South Carolina-based; Hirschbach buys Reefer Carrier JCT; Heartland Express buys Smith Transport, CFI; KLLM acquires Quest Global; Werner acquires Baylor Trucking; KAG acquires Carbon Express; Quantix acquires GW Tanks, Mid-States Packaging.
https://www.truckinginfo.com/10191670/ma-trucking-and-logistics-activity-to-stay-strong-in-2023
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