A new study conducted by PCE Companies reveals the effects and trends that are surfacing in transportation and logistics (T&L) M&A during the current pandemic. Covid-19 has profoundly changed the way many companies are conducting business, leading to a period of uncertainty as both investment bankers and business leaders learn to adapt to the new environment. Even before the current situation, T&L companies were already reeling from the results of the trade wars. Between the havoc caused by supply chain disruptions and the search for more stable trading partners, a large portion of trading volume is shifting to eastern ports, creating problems for many companies that operated through the western United States. These factors have led to an immediate reduction in transaction volume compared to the previous year. The graph below depicts how deal flow has changed in trucking, air freight, and logistics.
COVID Influence in Trucking, Air Freight and Logistics M&A Transactions in the US
- Between March 22 and June 13, T&L transaction volumes have declined by 59%.
- Transaction volume during this period was evenly divided up between the sub-sectors trucking, air freight, and logistics.
- While April and May saw the heaviest reduction in deal flow, volume picked back up again in June and we anticipate that later months will be more in line with 2019’s results.
Some business owners may be tempted to take a look at the current market pessimistically and lose hope of a lucrative exit strategy. The reality, though, is that those who act now will be in the best position to command a higher multiple in a market sorely lacking in quality businesses. For these individuals there is a silver lining. According to Preqin, one of the foremost providers of data and analytics in the investment community, there is a record $1.45 trillion of dry powder (loose cash held by financial buyers) that is just waiting to be put to use for the right opportunity. With equity market returns unsteady and interest rates low for the foreseeable future, the money will have to be put to other means. Companies that can weather these trying time will have passed the definitive stress test of the decade and will be in a good position to command the attention of these institutions. Some of these financial buyers even specialize in distressed businesses, giving struggling business owners the ability to gracefully exit the market.
For business owners that are leery of financial buyers, there are still a fair amount of strategic buyers on the lookout for ways to diversify their operations and shore up their competitive positions. This is confirmed by our current deal flow here at Plethora, where we are on the cusp of successfully negotiating several transactions in the T&L space, an area of major focus for us.
While the deal process has undeniably become more complex and nuanced, we believe the availability of capital and need for strategic diversification in the T&L industry has created an opportunity for many business owners looking to exit or partner with a top companies in the same space. Plethora’s expertise and relevant deal experience provides the solid foundation necessary to leverage your company’s unique strengths to achieve the exit you desire. Click here to see a list of some of our successful transactions or call us (714) 255-8862 to discuss how we can best support you in your acquisition or exit goals.
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