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The logistics market in mergers and acquisitions is "very robust right now," says Anderson. "We're seeing the most activity that I've seen in 15 years."
Around the year 2000, few firms were engaging in private-equity acquisitions in the supply chain and logistics arena. Activity began to grow dramatically in 2006 and 2007, but dried up during the economic turndown of 2008. It wasn't until 2012 that things began to pick up again, leading to the current moment where "a lot of sellers are really becoming active in the market," he says. "They have funds to invest and debt markets are good. It's going to continue on into 2015."
Post-recession, a lot of private capital stayed on the sidelines. But an even greater factor was the unwillingness of many business owners to sell when their company prices were down. Now that earnings are better, and valuations on the rise, investors are more eager to participate.
Several factors make logistics companies especially attractive targets for acquisition. Greenbriar is keenly interested in the growth potential of those businesses, Anderson says. Logistics and transportation closely tracks the state of the economy, which is in an upturn. A second criterion is more financial in nature – companies in that sector "can work without a lot of [long-term] capital having to be invested."
Both asset-based and non-asset companies can be tempting targets. “In the end,” says Anderson, “everybody gets good returns over the long term if they’re a good company.” For Greenbriar, the challenge lies in companies that offer the promise of growth over a “reasonable” period, say three to seven years, followed by an opportunity to exit the company.
Asset-based companies tend to be more cyclical in terms of earnings, says Anderson, with operating leverage that “pulls you down more in a downturn. We might have to ride that for three to five years without any growth.” As a result, most private equity companies tend to favor non-asset-based companies.
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