GENERAL TRENDS
Logistics Industry Outlook and Observations
Technological advancement and digitization continue to drive growth within the transportation and logistics (T&L) market, with an expected valuation of $12.9 trillion by 2027 and a CAGR of 6.5% globally
COVID-19-related challenges coupled with a cooling economy continue to present obstacles for the T&L market
Rising fuel costs, the persisting global supply chain crisis, and the skilled driver labor shortage all remain to be key roadblocks exerting pressure on logistics providers
After expanding 5% year-over-year in the first half of 2022, retailers are withdrawing in the short term to avoid the supply-chain congestion that brought on delays and product shortages in 2021
The changing geopolitical landscape this past year highly disrupted the supply chain logistics industry, as the market needed to evolve and adjust to the impacts of geopolitical events like the Russia-Ukraine war and the lingering impacts of Brexit
Other external factors such as parts and supply chain shortages made it difficult for asset-based carriers to keep their fleets at similar price points as the prior year
Regardless of the above challenges, the market remains resilient with continued technological improvements, the rise of e-commerce, and diversified sectors of the market
The diversification toward on-demand mobility services and data-driven services in the automotive industry is projected to drive growth by over 30%, with up to $1.5 trillion in additional revenue potential
The e-commerce boom combined with increasing global trade is expected to propel the transportation and logistics market growth forward, with global trade already reaching a record high of $28.5 trillion
IoT-enabled linked devices and technological advancements like AI-based tech, biometrics, GPS, and automated systems aid in streamlining logistics efficiency, augmenting market growth even further
Untapped growth potential globally within other sectors of the logistics market is evident through the global cold chain logistics market size, which is expected to grow at a CAGR of 14%, with the most growth expected in the Asia Pacific region due to rapid industrialization and urbanization
For the remainder of 2022, forecasts estimate a range between 10% and 14% Y/Y increase in LTL pricing, which is flat to slightly up from forecasts last month. Unlike truckload, which has seen softening over the past quarter, LTL pricing continues to increase
Recent and Upcoming Trends
As the T&L market starts to evolve and expand to meet consumer demand, companies are continuing to innovate and implement fundamental changes to increase their market share and remain dominant within the market
To combat the labor shortage within the trucking industry, retailers like Walmart, have offered robust truck driver training programs and a competitive salary that’s nearly double the average salary, to incentivize and retain talent
The fragmentation of the logistics market has opened up lucrative niches and opportunities, with behemoths like Maersk and Amazon capitalizing on e-commerce fulfillment by expanding control over other steps of supply chain logistics and becoming one-stop logistics providers
The rising consumer demand for retail goods in the US has driven the import of container volumes up 16% year-over-year, with the Port of Charleston expanding its working hours and providing leasing options for its new chassis
Across the industry, companies are proactively implementing creative measures and solutions to combat supply chain disruptions
The adoption of tech-enabled logistics platforms, like Uber Freight, has helped reduce the friction of business disruptions by digitizing the supply chain infrastructure and allowing businesses to recover from canceled shipments and the rising costs of trucking
Companies' investment in robotics to automate processes has not only cut costs and streamlined distribution network efficacy but also enticed a progressive and tech-savvy pool of potential recruits to join their workforce
555 expects to see an increase in freight brokerage M&A as the asset-light business model negates some of the asset-related difficulties that a traditional service provider would have to endure
M&A ACTIVITY
North American Transportation and Logistics M&A
DEAL SPOTLIGHT
• Roadtex operates a network of 32 cold storage facilities, providing expedited, temperature-controlled LTL transportation
• This acquisition provides Echo additional value-add in their services as well as diversified their business model from a pure-play brokerage
Date: 05/05/2022
Target: Roadtex
Buyer: Echo Logistics
Transaction Value: Undisclosed
• Fastmore is a Chicagoland-based broker with extensive knowledge in selling domestic non-asset-based transportation services to international freight forwarders
• This acquisition provides Echo a unique point of entry into an expansive network of expedited brokerage for the international freight forwarding market leveraging multiple equipment types, including cargo vans, straight trucks, and full truckload
• This new acquisition provides Echo with the cross-selling ability and insights into the international freight market that has historically evaded them
Date: 11/03/2022
Target: Fastmore
Buyer: Echo Logistics
Transaction Value: Undisclosed
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The opinions expressed herein are those of 555 Capital Advisors. There is no guarantee that any predictions/projections as to certain market activity or events will come to fruition or past market or transaction performance referenced within will yield the same results as transactions previously conducted by 555 Capital Advisors.
