Introduction
Last-mile has become a buzzword with a positive connotation in the investment community , and for good reason . These businesses are extremely complex to operate , offering opportunities for value creation , and they are supported by e-commerce and other tailwinds in our service-based economy . Operators understand the complexities associated with running these businesses . Still , to achieve an optimal outcome in the M & A market , it is equally important for them to understand how investors view them . In this article , we aim to demystify some of those viewpoints . Although this article is oriented around last-mile service providers , many themes apply equally to expedited / time-critical delivery businesses .
First , a discussion of the general M & A market is warranted . In mid-2024 , private equity firms had about $ 1.4 trillion of dry powder to put to work ( in the U . S . alone ) on the buyside . In some ways , more importantly , they have more than 11,000 portfolio companies in the U . S .— as many as 28,000 globally — waiting to be monetized on the sellside . These high-performing people don ’ t like not getting things done , and they are ready to hit the field running . With U . S . inflation hitting a three-year low of 2.5 % in August 2024 and the Fed broadly taking a more dovish approach by lowering rates by 50 basis points at the September 2024 meeting , general optimism exists in the M & A market heading into 2025 .
Of course , a full picture requires us to overlay this against the transportation and logistics ( T & L ) sector , which has faced its own challenges coming out of COVID-19 . “ Have we finally hit the bottom of the current freight recession ?” is perhaps the most relevant ( and certainly most recurring ) question in the T & L market today . While underlying trends point to a steadying freight market , not necessarily a bullish one , conditions have improved enough to enable the completion of several landmark acquisitions , including Knight-Swift Transportation ’ s ( NYSE : KNX ) acquisition of Dependable Highway Express ’ lessthan-truckload ( LTL ) division , Sennder ’ s acquisition of C . H . Robinson ’ s ( NASDAQ : CHRW ) European Surface Transportation ( EST ) business , and RXO ’ s ( NY- SE : RXO ) acquisition of Coyote Logistics from UPS ( NYSE : UPS ). All three transactions were announced within 45 days and were consummated by sophisticated strategics , indicating a level of confidence in underlying freight markets . For private equity and other strategic buyers , the time is potentially ripe for both new platform and add-on M & A — before the next freight market upswing and more robust EBIT- DA performance .
What Differentiates Your Business ?
We don ’ t have to tell readers of this publication how challenging it can be to operate a last-mile business . But rest assured , in many cases , those same complexities ( when managed well ) drive value from an investor ’ s perspective . The sheer operational intensity of this industry demands strong management and controls of the highest standard ; teams that genuinely embrace this ethos will differentiate themselves and win in what continues to be a very competitive market . Last-mile partners are often the face of a shipper to its end customer , whether in a DTC , B2B , or B2G application , and financial incenfall / winter 2024 I customized logistics & delivery Magazine 43