More Truck Mergers Seen as Carriers Seek Bargains

This story appears in the June 1 print edition of Transport Topics.

A wave of transportation mergers and acquisitions may be on the horizon, as the recession weeds out distressed companies and carriers shop for bargains to help them secure more freight, several industry watchers said.

“You will see a significant increase in deals closing in the next two quarters,” said analyst Andy Ahern, head of Ahern & Associates Ltd. in Phoenix. “The thought process in this industry is: ‘I need to get clients, and I can’t develop them myself.’ ”

Other analysts also said they expect a ramp-up in trucking consolidations but that it could take longer than two quarters.

“There will be deals in 2009,” said Jason Bass, managing director and co-head of the transportation and logistics group at BB&T Capital Markets in Richmond, Va.

However, “they’re going to be more in the distressed or challenged category,” he said. “We’re going to see some orderly liquidation. We’re going to see some distressed M and A.”

A truly “competitive” M and A environment was likely not in the offing, Bass said, “until sometime next year.”

“There is an increased interest in buying companies,” said Lana Batts, principal of consulting firm Batts & Associates, Arlington, Va.

She said that all but the most distressed sellers “are probably going to hold on until 2010 or 2011,” in hopes of securing a higher sale price than buyers may be willing to pay in the recession.

However, at least one firm has signaled its intention to shop for bargain-priced businesses.

“We’re going to pursue other businesses,” Robert Davidson, CEO of Arkansas Best Corp., said last month at the Wolfe Research Global Transportation Conference in New York.

Concerns about scarce freight were underscored last week by American Trucking Associations’ latest tonnage report, which showed both monthly and year-over-year declines. At the same time, another report revealed that the U.S. Class 8 truck fleet actually grew slightly in the first quarter of 2009.

This continuing imbalance of supply and demand prompted one normally acquisitive investment firm to put off prospects for acquisitions until 2010. Full Story.....