In 2021, interest in mergers and acquisitions for transportation and logistics skyrocketed. Companies wanted to leverage relationships with suppliers to meet their distribution needs and overcome supply chain concerns resulting from COVID-19 disruption. According to PwC, the value of deals was 84 percent higher last year than in 2020, and deal volume was up 11 percent.
Reasons for choosing the M&A route vary. Some firms want greater supply chain visibility. Others seek to avoid pricing issues or falling down logistics firms’ priority lists. Strong demand trends in purchasing goods online also incentivize some M&A activity. A 3PL might also acquire an LTL business as part of its growth strategy. A tech-enabled 3PL may acquire another company with tech that will speed up their own technological advances.
Additionally, a company may choose M&A as a route to:
- Acquire new capabilities to fill perceived gaps in their organization, e.g. technology
- Grow into new products or services, as it may be quicker than building the capability in-house, e.g. a brokerage acquiring an asset business
- Enter new geographies, e.g. buy a Canadian business
Why You Should Choose A Consulting Transportation And Logistics Company To Guide You Through The M&A Process
Unfortunately, even though M&A activity surged, many firms went into deals ill-equipped. Managers frequently failed to understand the merger and acquisition process, leading to poor outcomes for all parties.
To avoid issues, firms should consider partnering with specialist transportation management consulting companies to guide them through the M&A process. Here are some of the benefits that working with consultants can bring:
Get Professional M&A Strategy Development
Going into an M&A deal without a plan detailing how you will “win” is dangerous. You could lose money, and the partnership may not meet your operational objectives.
Working with consultants who are in touch with the transportation landscape lets you avoid this. Their tight relationships with key decision-makers and industry executives improve your vision. Under their guidance, you have a better understanding of where the sector is heading and what you need to do to remain competitive.
Specifically, M&A specialist consultants can provide you with a complete inorganic growth strategy. They can also assess your operating model to check that it is compatible with the proposed M&A deal.
An example can be found in the recent Uber Freight acquisition of Transplace. This was designed around inorganic growth, but also provided a complimentary model to what each entity had. In Transplace’s case, their focus on managed transportation complimented Uber Freight's capacity-on-demand concept. Additionally, with the density of Transplace’s network, it was ideal for usage in Uber Freight’s Powerloop program. As Uber Freight and Uber overall move more towards profitability, that inorganic (or acquisition) growth is ideal.
Select The Right Partner
Consulting companies can also help you select better M&A targets. Owing to their thorough understanding of the competitive landscape, operating models, and core values of logistics and transportation firms, such agencies give you the industry-specific knowledge you need to make better decisions.
Typically, consultants adopt a three-step process for finding suitable partners, including identifying targets, target sourcing, and readiness evaluation. The goal is to find a shortlist of suitable partners within the transportation and logistics space who are ready to work with you and fulfill your operational needs.
Improve Due Diligence
The next step is due diligence – investigating, auditing, and eventually verifying an acquisition or merger deal. The goal is to give the buyer all the operational, HR, and financial information they need in advance of the M&A so that they know exactly what they are getting.
- Identifying potential problems with an M&A deal
- Ensuring that the deal complies with the purchasing firm’s criteria
- Confirming that relevant information about the deal is true
- Finding information that could affect the value of the deal
Consulting firms can help you carry out due diligence in various dimensions, including:
- Operational due diligence
- HR due diligence
- IT due diligence
- Commercial due diligence
- Cultural due diligence
They can also assist with detailed integration and separation planning. These help to:
- Ensure that your financial and operational objectives are aligned
- Prioritize organizational change and communication in the target company
- Mitigate value erosion and risk
- Improve how businesses function together once partnered
Improve Transaction Execution
Firms looking for transportation and logistics M&As can also fail to carry out transactions optimally. They may struggle with deal structuring, bid negotiation, and make tax mistakes.
Metafora is an advocate for knowing your strengths. This also means knowing your weaknesses and recognizing when to call on outside help. That being said, we are the first to admit that we are not experts in the tactics involved in the transactional execution stage of the M&A lifecycle.
We do recommend finding experts who can help provide detailed deal structuring and can negotiate on firms’ behalf. In this phase, you’ll also want financial and capital advisory, ensuring you make the best possible use of available funds.
Better Post-Deal Integration
Lastly, consulting services can help you improve integration post-deal. For example, they can assist with implementing management harmonization. They can also:
- Structure compensation to provide optimal incentives for staff across the new organization
- Improve processes so that all parties can fully leverage the benefits of the M&A
- Work to harmonize culture and reduce conflict between the acquiring and selling firm
- Improve synergy between firms’ operations
- Boost operational readiness
- Develop and implement optimized management processes for executives, management, and seat level roles
The truth is, most acquisitions fail to realize their total projected value due to poor integration.
Not every acquisition will be a 1:1 match for your business; most of them aren’t. But the decisions you make to handle the acquisition, in tandem with expert strategy provided by a consultant, are the most important ones you can make. Though it can be hard work to integrate new employees, culture, and operations, the results you will see from excellent management will begin to emerge.
The Bottom Line
M&As in the transportation and logistics sector are complex. Therefore, companies planning such activities should work with experienced consultants to maximize their chances of success from start to finish and beyond. Failing to do so could multiply risks and lead to adverse financial outcomes.
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If you’re ready to take the next step and learn what it’s like to work with Metafora, please contact us to get started!