The sluggish U.S. economy combined with tight capacity levels continues to make mergers, acquisitions, partnerships and other deal-making initiatives attractive within the trucking industry, according to recent research by global consulting firm PricewaterhouseCoopers (PwC).
“Trucking is still a very fragmented industry; there are a lot of players out there. And the advantages of becoming a larger company in this segment remain strong, as it affords an opportunity to add customers and qualified employees – especially drivers,” Ken Evans, U.S. transportation and logistics leader at PwC, told Fleet Owner.
In a quarterly survey PwC plans to release Tuesday, the firm noted many catalysts are expected to drive deal activity over the rest of 2012 despite growing concerns that European sovereign debt issues, a tepid U.S. recovery, and a hard landing in emerging markets, among other factors, could provide macroeconomic shocks.
“There’s certainly going to be a strong push for deals in trucking because it’s partly a push to gain greater customer, and thus freight, ‘diversity’ so carriers can weather market volatility better,” Evans explained. “Now it will always be great to specialize in trucking – to offer specific services for certain niches. But many carriers don’t want to have all their eggs in one basket.”
While it’s neither a merger nor an acquisition per se, the recent drayage partnership announced by third-party logistics firm Pacer International and TL carrier CRST International exemplifies this freight diversification” trend,
The two companies forged a multi-market dedicated drayage agreement at the end of April focused on driving intermodal drayage efficiencies and providing incremental capacity for Pacer. Additionally, CRST formed a separate operating unit, CRST IMX, within its Dedicated Services subsidiary as part of Pacer’s highly integrated intermodal door-to-door product offering, with plans to add 200 trucks this year starting in Chicago, IL and Salt Lake City, UT.
Pacer and CRST also expect to collaborate further to attract additional short-haul business in an effort to reduce empty miles and help balance equipment flows. “We expect that our dedicated solutions will attract other customers and allow for better equipment utilization, fewer empty miles, and lower costs,” noted Dave Rusch, president & CEO of CRST International, in a statement.
PwC’s Evans added that the need for greater “geographic diversity” in terms of freight is also going to drive such deal-making efforts near term as well.
“Take the construction industry – some markets in the U.S., such as California, Las Vegas, and southern Florida, were hit tremendously hard. Yet others didn’t suffer nearly as much of a drop,” he explained. “That’s why the aspect of geographic freight diversity has become more helpful, expanding and/or filling in networks where there is higher freight availability.”
Andre Chabanel, another partner in PwC’s transportation & logistics practice, noted however that carriers would be wise not to stray too far from their core expertise.
“It’s a bit of a trade off, for there’s risk going into unfamiliar markets,” he said. “What you’ll see is more carriers trying to grow ‘critical mass’ through deals in specific niches in an effort to fill out their freight networks and add more customers.”