Trucking / logistics roll up
I am looking at the possibility of doing a roll up of trucking / logistics companies in the lower middle market. I know trucking can be a cyclical business with price pressure. But I also see it as a highly fragmented industry with evergreen demand. Eager to hear if anyone has any direct experience in the space and what their thoughts are.
Trucking biz is awful as of Q4 2024. Freight has been one way traffic (down) since the end of covid.
Value creation is incredibly hard. There is no pricing power, as the barrier to entry is non existent. There is no pricing discipline as shit tier operations/owner operators (genuinely illegal Indian/Eastern European drivers) will take disgustingly low per mile rates, eroding any value you have in the market. Sure there are carriers that can do contracted lanes, but few and far between. Trucking is effectively a commodity trading business...but more capital intensive. You're constantly battling to keep your trucks busy for thin margins. Your drivers that are reliable are aging out and passing on the higher costs of younger drivers brought into the industry are impossible to pass on to customers because there is always an owner-operator/shittier company willing to do it for worse margins.
Ask yourself - how does a trucking company create value over and above the asset base? There's not really a "better mousetrap" as everyone uses similar dispatch/routing software, pays their drivers a similar wage, runs the same equipment (within the selected subcategory). What secret sauce can you, the trucking company, offer the shipper? Other than competing on price, there's not really much to go with. Everyone says they are reliable & courteous and punctual blah blah blah
Go look at biz buysell and see how many carriers are for sale. That should tell you a lot about the health of the industry. Model wise, a broker (freight or customs) is probably a better bet from a logistics POV. Don't get me started about 3PLs either...I know there are plenty of ecommerce tailwinds, but i hate that business.
That's great feedback and pretty much what I expected to hear. I appreciate the candor.
we are quite literally in the longest freight recission in US history.. but yea go for it
Its better to start your own trucking business than doing a rollup. You'll be paying a premium for earnings without any certainty if those earnings will exist next year. Maybe you can enter this industry via a small acquisition but not a good idea to roll-up further unless you are acquiring a long-term contract from the seller as well. Low leverage and organic growth is preferred strategy. But be prepared to be undercut from the competition. Some loads truckers were accepting didn't even cover fuel costs for the trip, this is the competition you are up against.
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