Hornung-Scherr : We are predicting strong interest from strategic and financial buyers in this space , with credit and freight markets , inventory levels , equipment , fuel , drivers , safety , and insurance as recurring factors impacting M & A activity .
CLDA Mag : What sectors will be ripe for M & A activity in 2023 ?
Berg : We believe most sectors of transportation and logistics will remain good targets for M & A activity in 2023 , with last-mile continuing to be a highly desirable asset class . It ’ s no coincidence that last-mile ’ s “ asset light ” operating model aligns well with the investment criteria of most financial investors , who are doing an increasing number of deals in relation to their strategic acquirer counterparts . Further , last-mile is perfect for disruption as technology-driven solutions , which look to unlock efficiencies and reduce costs , play an increasingly important role in the global supply chain .
Meanwhile , capital in reserve and asset valuations ( such as equipment , real estate , and drivers ) remain strong on company balance sheets . However , the Fed has been issuing multiple and sizeable rate increases . It will be interesting to watch how the accessibility and cost of capital impacts M & A activity in 2023 and beyond because of these rate hikes .
Beyond the economics , we also need to consider industry demographics . Transportation and logistics is an aging industry , particularly with the expected retirement of Baby Boomers over the next decade . Business owners who expect the post-pandemic freight market to turn may attempt to “ cash in ” within the next twelve months .
Hornung-Scherr : We expect heightened interest in :
• Specialty carriers and last-mile
• Carriers outperforming peers
• Carriers with less exposure to spot markets .
Buyers will be more selective given inflation , interest rates , equipment prices , the tight driver market , increasing maintenance and parts expense , and the drop in spot rates . These trends may cause more focus on last-mile .
CLDA Mag : What can sellers do to increase their attractiveness to sellers next year ?
Berg : There are a series of initiatives or preparations a seller should consider if they want to increase their attractiveness to buyers and / or maximize enterprise ( transaction ) value :
1 . Get the company ’ s documentation in order , particularly financials . Having multiple years of strong , audited financials fosters confidence in a buyer . This exercise is great practice for a seller who should expect to provide a wealth of confidential information as part of the buyer ’ s due diligence process .
2 . Align current business initiatives and resources with the desired transaction timeline . Beyond financial health , address business risks that potentially could disrupt the deal or negatively impact the valuation of the business , such as accident and benefit liabilities , safety , compliance , litigation , and cyber security issues .
3 . Build and develop an experienced leadership team which removes the owner from the day-to-day operations . This is extremely important if the owner won ’ t continue to operate in the business post-transaction .
What all this means is that sellers should run their business like it ’ s for sale now , in preparation for a transaction in two to five years .
Tenney : The sellers that can prove they have business improvements in place ( such as additional trucks / drivers , increase in volume / utilization ) that go beyond a rate increase ( which may or may not have stickiness to it ) will experience higher valuations in the marketplace , all
28 customized logistics & delivery Magazine FALL 2022