Auto Transportation

Posts Tagged ‘complimentary services’

Transportation and Logistics (T&L) sector is bucking the trend with mergers and acquisition activity with deal flow on the increase.

The industry is facing a perfect storm with rising fuel costs, lower demand and excess capacity cutting into margins. The answer for a large majority of the well funded industry players has been acquisitions.

Customer diversification has been a key variable fuelling some of the appetite.  For instance, T&L companies servicing the automotive sector have seen loads and shipments drop-off a cliff.  Buying companies exposed to different segments of the industry allow idle or underutilized assets to buoyant segments. ”Organic growth in this market is tough – we’re relying on acquisitive growth over the next 12-month” says one industry executive.

Another variable fuelling consolidation is the customer seeking increasing choice and flexibility in terms of the service offering.  No longer do they want to deal with one company for their import/export needs, another for their domestic transportation and yet another for their warehousing. Customers want a one-stop shop.  Acquisitions allow a T&L provider to offer complimentary services virtually overnight.

Lastly, the value proposition to build economies of scale in the T&L space are compelling. Fixed costs on technology platforms and other revenue generating assets, once covered allow for every incremental dollar of revenue to flow to the bottom-line.

Real money is made in tough times. The challenge is in uncovering the opportunities amongst the turmoil.