Sunday, October 28, 2012

Freight Brokerage Acquisitions on the Increase

XPO Logistics’ acquisition of OHL’s freight brokerage business, Turbo Logistics, is among a growing list of freight brokerage acquisitions that have been made by US companies this year alone.

So why is there an interest in freight brokerage companies? According to Jim Bisaha, Vice-President of SDS Partners, “Many established transportation providers are looking to diversify their book of business. Acquiring non-asset based transportation companies are a good investment and it’s a logical extension of expanding the transportation business footprint.”

Indeed, the Turbo acquisition will allow for XPO to expand further into the expedited transportation and temperature-controlled trucking services. Similar to XPO’s acquisition is that of another recent acquisition - Echo Global Logistics’ acquisition of Purple Plum Logistics. Like Turbo Logistics, Purple Plum Logistics is a non-asset based truck-load brokerage specializing in temperature-controlled solutions.

Other freight brokerage acquisitions that have been made this year include Saia’s purchase of the Robart Companies and Roadrunner’s acquisition of Capital Transportation Logistics and Prime Logistics.

Not only is the need for diversification driving these acquisitions but perhaps another reason for the interest in freight brokerage companies is the need for access to additional drivers. As driver shortages intensify, trucking companies are raising pay rates and offering special perks to attract drivers, however, the competition among companies to attract drivers is fierce.

Another likely reason is that of the sluggish US economy. As Bradley Jacobs, CEO of XPO Logistics, noted in the company’s recent earnings report, like many freight companies, XPO has felt the effects of the recent softness in volumes because of a host of political and economic uncertainties. For those companies with access to cash, the uncertainty and softness in the market will result in some consolidation within a market in which is heavily fragmented with regionalized players – a good opportunity for those companies wanting to expand in specific geographic regions of the US. For example, Roadrunner’s acquisition of Capitol Transportation Logistics allowed Roadrunner to further expand its customer base in the US Northeast.

As such, acquisitions are on the increase and will likely to continue into 2013. “Look for acquisitions to continue in 2013 as transportation firms look to broaden their footprint,” said James Bisaha.