Expect to See More
Near-Term Sales, M&A
Activity in Logistics

Editor-in-Chief
Russell Goodman
A conversation with Benjamin Gordon, managing director of BG Strategic Advi-
sors, a supply chain investment bank headquartered in West Palm Beach, Florida.

BG Strategic Advisors focuses on putting deals together for transportation and logistics companies, including raising capital, mergers and acquisitions, sales or other transactions. The company has performed such work for at least 30 companies over the last eight years, Gordon says. SupplyChainBrain caught up with him in June at eyefortransport’s 3PL Summit/CSCO Forum in Atlanta.

Q: The industry has seen quite a bit of M&A activity recently. What’s driving that?

Gordon: We’re seeing an upsurge in M&A activity in a number of areas. First, you see private acquisitions like Genco, which just bought ATC, and TransForce buying Dynamex. Second, you see it in corporate divestitures. So, Supervalu just sold TLC to Ryder. We see rumors of Caterpillar selling Cat Logistics. Third, you see it in IPOs, like Echo Global Logistics and Roadrunner recently going public—and more coming soon.

What’s driving all this activity is a combination of three factors: buyers’ appetites, sellers’ appetites and market change.

So, buyers are more intent than ever in buying and for a number of reasons. Over the last two to three years, buyers have built up a lot of capital. Corporate balance sheets today have $2tr in cash. Private equity firms have half a trillion in cash. Lot of money out there. They’re finally starting to feel confident to start spending that money. Buyers are eager to put that money to work.

Sellers are the second factor. After a two-year period where only distressed companies were selling, sellers are now in a position to get full value for their businesses. Performance is back up, unlike in 2008 and 2009, and the multiples of the profit that they can get paid is back up. So, if they want to sell, they can take advantage of those positions.

The third change is in the market structure. Basi-
cally, the tax environment is more favorable for sell-
ers really than at any other point in human history.
We have a low capital gains environment, which
we will have for this year and next year. That’s likely
to be up significantly in 2013, so sellers want to take
advantage of that.

Q: So, can you give us a laundry list of good reasons why a logistics company might want to consider selling or merging?

Gordon: One reason would be financial. A logistics company would consider selling if financially they thought they could get an attractive outcome. If the average logistics company two years ago got valued at four times profit and today might get six times profit, there’s a significant bump up in what they can get paid. It’s not just about the multiple, but how good is their business, how strong is their profit, the sustainability, a whole lot of factors.

Reason number two is strategic. A seller might simply decide their business makes more sense in the context of something bigger. Example: We worked out a deal with Ray Trans, which does truck brokerage. It was successful, but thought it would be more successful as part of something bigger. It was sold to Echo Global Logistics before Echo went public. Now, strategically the business is in a position where they can give customers a broader, national solution.