The 2:00 Minute Warning

Last week it was announced that Knight-Swift, the largest U.S. truckload carrier, has acquired AAA Cooper—a top 20 LTL carrier with a large regional footprint primarily in the Southeast. This gives Knight-Swift a newfound foothold in the LTL industry.

In the full disclosure department, AAA Cooper has been a valued carrier partner in our Freedom Logistics program for over 20 years. Reid Dove and his team have built a solid organization offering a consistently high level of service at a competitive price. The Knight-Swift team are also strong operators, and we look forward to continuing this relationship.

AAA Cooper will continue to operate independently after this deal, but with the support of Knight-Swift for purchasing, driver recruiting strategies, and backhaul fill opportunities. 

We've received several questions about what this acquisition means for shippers and the LTL industry. Here are the most frequently asked questions:

Why did Knight-Swift make this acquisition?

When you have the combination of carriers with strong balance sheets and access to attractive financing, as well as very strong carrier valuations, you are going to see acquisitions.

These deals are even more likely when there is a strategic component involved. Dave Jackson, the President & CEO of Knight-Swift, noted that they have been interested in expanding into LTL for some time. It can help mitigate the cyclicality of the truckload environment. Right now, the truckload industry is experiencing a surge in demand and rates; however, things can and will change. With Knight-Swift now having access to AAA Cooper's customers, and vice-versa, this acquisition is projected to provide Knight-Swift with ongoing stability and growth opportunities. As a result of this deal, roughly 14% of revenue for Knight-Swift will now come from the LTL business, and Jackson has shared that they're looking to grow in size and geography both organically and through future acquisitions.

How does this impact Knight-Swift in terms of capacity?

According to the Wall Street Journal's recent article "Knight-Swift Expands Trucking Reach With AAA Cooper Acquisition" this deal will add a considerable amount of capacity to the Knight-Swift network:

"The deal adds nearly 3,000 tractors and 7,000 trailers to Knight-Swift’s fleet, and is expected to add $780 million in 2021 revenue." The terminals, equipment, and drivers that are in short supply across the LTL and truckload industries can now be shared and optimized, creating capacity that wasn't previously available.

Do we expect more LTL carriers to be acquired in the foreseeable future?

If you read the reports from the financial analysts, shippers can expect more acquisitions. Aside from the strategic component, analysts expect larger carriers to be able to reduce costs for the acquired carriers. Whether it's equipment, insurance, or other important areas such as IT infrastructure, the expectation is that the combined business entities will have better EBITDA numbers. Combined with the ability to add terminals, equipment, and drivers as Knight-Swift has, it will not be surprising to see large carriers make these types of moves.

How will these acquisitions impact me as a shipper?

Acquisitions are just one way in which carrier networks are constantly changing, which is why we have continued to point out the value of the carrier "fit" factor. Shippers should constantly assess where their freight has the most value to their carriers. For example, even though you may have multiple carriers operating in the same region, your freight may be more valuable to one carrier than another based on the customers they serve and where they want to run their trucks.

If you could use help assessing the best carrier fit for your freight, or want to learn more about how to get the most effective rates, we encourage you to get in touch with us. We can analyze your shipping activity and benchmark your rates against what we determine is the best fit for your freight.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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