Though trucking mergers and acquisitions (M&A) followed the freight market into a down cycle, conditions have now stabilized, showing upward signs for the sector in 2024. With conditions constantly improving, major freight M&A activity will surely re-emerge later this year (M&A in the freight industry was still feeling the impacts of COVID-19 in early 2024).
Jonathan Britva, managing director at Republic Partners, referred to it as a “mixed bag.” He comments: “It’s still a fairly muted market overall in terms of the activity. There’s certainly been a pickup in conversations for sure. There’s interest out there from potential buyers that we are engaged on. We’ve got several deals in the market.”
The M&A sector is facing an issue with sellers who are looking for more than what buyers are willing to pay. Britva suspects this problem will continue until overall rates improve and performance remains consistent: “I think sellers are becoming more realistic as to their values. But I think a lot of folks are saying, ‘hey, I know it’s a tough time, but we can weather the storm and we know it’s going to bounce back.'”
Tenney Group CEO Spencer Tenney saw an interest spike during Q1, saying that the activity is caused by conversations from buyers and sellers: “The feedback we are getting is that many business owners that desire to exit in the second half, or just throughout 2023, just never felt comfortable with the environment. They’re just much more confident in their ability to get a deal done that’s economic- ally acceptable to them.”
Tenney expects normalization to take place sometime in Q3 and Q4: “The motivations vary across the board, but one of the common themes is just offsetting rising operational costs, and that’s a major problem right now. So, we’re seeing many buyers look to offset costs, and in the same motion diversify and attempt to create insulation from spot market exposure.”
Some deals are pushing forward from carriers facing current business challenges. Therefore, many have decided to wait until a market up cycle for an increase in their valuation.
Tenney continues: “For those, over the past 12 months, whose businesses were materially affected, their ability and interest to get back into an M&A environment is going to take a little more time. That’s why we expect multiple waves of sellers to begin the process of exiting.” It appears the 2024 upcycle will be much slower and steadier.
