Executive Briefings

Reshaping the U.S. Trucking Industry

Analyst Insight: The U.S. trucking industry is experiencing unprecedented change that is spurring consolidation in the fragmented market. For shippers, the upheaval can be both good and bad news. Acquisitions can offer shippers the opportunity to expand operations to new areas without the need to change carriers. Conversely, consolidation reduces competition in the marketplace and may have a negative impact on rates or service levels. Throughout this shakeout, shippers will need to determine how the market adjustments will fit into their strategic growth plans. - Brian Broadhurst, Vice President of Transportation Solutions, Spend Management Experts

Reshaping the U.S. Trucking Industry

The overall 2015 M&A activity in the trucking industry has been that of small niche acquisitions, with the obvious exception being XPO Logistics’ acquisition of Con-way. The majority of the impact has been in the LTL market. As a result, the top 25 LTL carriers represented 91.1 percent of total LTL industry revenue in 2014 compared to 89.4 percent in 2013 and 88.8 percent in 2012. The TL market is substantially more fragmented, with the top 25 carriers accounting for approximately 8 percent to 10 percent of total TL revenue for several years.

For the most part, these acquisitions can be categorized into the following:

Brokerages

For the approximate 10,000 licensed truck brokers, it was inevitable that the truck brokerage market would consolidate, especially as the U.S. trucking industry faces tightening capacity partly due to a declining number of truck drivers. So, it’s no surprise that many of the acquisitions were made in this space. One of the largest was the UPS acquisition of Coyote Logistics. Coyote is expected to benefit UPS particularly during peak season to assist in arranging contract transportation and increase backhaul utilization.

C.H. Robinson solidified its role as the largest truck broker by acquiring Freightquote, an internet-based freight broker focused on small businesses with irregular shipping patterns. Meanwhile, ABF Logistics acquired Smart Lines Transportation, a truckload brokerage primarily focused on the food, energy and industrial segments.

Specialized Services

ABF Logistics’ acquisition of Smart Lines Transportation was one of a specialized broker focused on specific industries. In addition, CRST acquired Pegasus Transportation, a regional truckload provider that focuses on the high security, temperature-sensitive, health sciences sector as well as the just-in-time automotive industry.

International Expansion

Low interest rates and a region that is growing despite a global economic slowdown have prompted investments from the likes of Swiss-based Kuehne + Nagel. A leading freight forwarder and contract provider, Kuehne + Nagel acquired ReTrans, an intermodal freight broker based in Memphis. According to Kuehne + Nagel, “By acquiring ReTrans we obtain expertise in intermodal transportation with direct access to the most important North American railroad companies, an innovative [less-than-truckload] brokerage business and a platform to provide managed transportation services.”

In addition, cross-border services continue to attract interest, a trend that has been ongoing for at least a couple of years. For example, Roadrunner Transportation Systems acquired Stagecoach Cartage and Distribution, a provider of truckload and logistics services, to expand its U.S.-Mexico capacity.

The Outlook

While the U.S. trucking industry is in a consolidation period and will likely continue this trend into 2016, it is also evolving. Faced with industry trends that can decelerate growth, consolidation is bringing unprecedented change that includes expanded services and expanded geographic reach. Shippers will need to weigh their options to determine how these changes will affect them. For some shippers, these changes will be beneficial while others may find the changes a hindrance.

The overall 2015 M&A activity in the trucking industry has been that of small niche acquisitions, with the obvious exception being XPO Logistics’ acquisition of Con-way. The majority of the impact has been in the LTL market. As a result, the top 25 LTL carriers represented 91.1 percent of total LTL industry revenue in 2014 compared to 89.4 percent in 2013 and 88.8 percent in 2012. The TL market is substantially more fragmented, with the top 25 carriers accounting for approximately 8 percent to 10 percent of total TL revenue for several years.

For the most part, these acquisitions can be categorized into the following:

Brokerages

For the approximate 10,000 licensed truck brokers, it was inevitable that the truck brokerage market would consolidate, especially as the U.S. trucking industry faces tightening capacity partly due to a declining number of truck drivers. So, it’s no surprise that many of the acquisitions were made in this space. One of the largest was the UPS acquisition of Coyote Logistics. Coyote is expected to benefit UPS particularly during peak season to assist in arranging contract transportation and increase backhaul utilization.

C.H. Robinson solidified its role as the largest truck broker by acquiring Freightquote, an internet-based freight broker focused on small businesses with irregular shipping patterns. Meanwhile, ABF Logistics acquired Smart Lines Transportation, a truckload brokerage primarily focused on the food, energy and industrial segments.

Specialized Services

ABF Logistics’ acquisition of Smart Lines Transportation was one of a specialized broker focused on specific industries. In addition, CRST acquired Pegasus Transportation, a regional truckload provider that focuses on the high security, temperature-sensitive, health sciences sector as well as the just-in-time automotive industry.

International Expansion

Low interest rates and a region that is growing despite a global economic slowdown have prompted investments from the likes of Swiss-based Kuehne + Nagel. A leading freight forwarder and contract provider, Kuehne + Nagel acquired ReTrans, an intermodal freight broker based in Memphis. According to Kuehne + Nagel, “By acquiring ReTrans we obtain expertise in intermodal transportation with direct access to the most important North American railroad companies, an innovative [less-than-truckload] brokerage business and a platform to provide managed transportation services.”

In addition, cross-border services continue to attract interest, a trend that has been ongoing for at least a couple of years. For example, Roadrunner Transportation Systems acquired Stagecoach Cartage and Distribution, a provider of truckload and logistics services, to expand its U.S.-Mexico capacity.

The Outlook

While the U.S. trucking industry is in a consolidation period and will likely continue this trend into 2016, it is also evolving. Faced with industry trends that can decelerate growth, consolidation is bringing unprecedented change that includes expanded services and expanded geographic reach. Shippers will need to weigh their options to determine how these changes will affect them. For some shippers, these changes will be beneficial while others may find the changes a hindrance.

Reshaping the U.S. Trucking Industry