With the announcement last week that Knight-Swift is acquiring U.S. Xpress in a deal that is expected to close mid-year, shippers should be asking: “How will more consolidation in the trucking market affect my company?”
We’re very familiar with both of these companies and the CEO of U.S. Xpress, Eric Fuller, was a panelist on several of the webinars we’ve hosted. After the acquisition, Tim Harrington of Swift will become the president of U.S. Xpress. Right now, the plan is for U.S. Xpress to continue to operate as a separate brand.
Whenever we see a sizeable acquisition of this nature occur, there are a couple of things that shippers need to consider.
First, shippers can expect more consolidation in the trucking industry as acquisitions / mergers will continue. Knight-Swift is doing what every good carrier does as they look to maximize the return on their assets. They have been and will be constantly evaluating their network to make it as efficient and effective as possible.
Knight-Swift came together when Knight Transportation and Swift Transportation merged in 2017. Since then they have been in growth mode and have made six acquisitions in the past couple of years, including three in the last five years. What really grabbed shippers' attention was when Knight-Swift chose to expand their LTL footprint with the acquisition of AAA Cooper and Midwest Motor Express in the LTL sector. Overall, they have performed well in the truckload market also.
When a carrier chooses to grow, they will evaluate the infrastructure required to support that growth and ask: “Do we build or buy that infrastructure?” There are several reasons why buying is often the more attractive option since time and “speed to market” are critically important factors.
If you are a carrier, an acquisition accomplishes three important goals. First, it instantly expands their footprint of real estate and terminals. Second, it helps them grow the pool of assets (e.g. trucks, trailers and terminals) they need to move freight. Third, it provides them with a new group of drivers to get the freight moved.
From a financial perspective, the market is counting on the fact that since Knight-Swift is a strong operator that has produced solid results, they will be able to make U.S. Xpress’ network more efficient and significantly improve the margin on freight moving within the U.S. Xpress network.
Looking forward, we expect more acquisitions and consolidations in the trucking industry. For example, carriers like T-Force have demonstrated they can acquire and integrate other carriers in to their network. That is why shippers need to constantly evaluate their carrier sourcing strategies and assess what we call the "FIT" factor.
If your company is planning to conduct an LTL or TL sourcing event in the near future, send us an email or give us a call. We have a wealth of experience and expertise and we can share strategies to get the best possible results from a sourcing event.
We encourage you to get in touch to learn more.
Wolfe Research Quarterly Survey
Before signing off, here’s an important tip. Stay abreast of what is happening in the transportation market so you and your company will not be “surprised” when things like mergers, closures or other events occur. One of the best ways to do that is by participating in the Wolfe Research Quarterly Survey.
Every quarter, Scott Group and his team at Wolfe Research conduct a shipper survey to gauge activity levels in the transportation industry and the broader economy.
In January, we interviewed Scott about what is happening in the industry. It has been one of our most popular interviews and Scott shared some great insights. When you participate in the survey, you get Wolfe Research’s transportation insights free of charge. In exchange for your time, they provide you with a free copy of the published report complete with charts, tables, and analysis.
Their shipper survey, The State of the Freight, will take about 10 minutes to complete. And it is a great deal for you. So invest the 10 minutes and understand what is happening in the transportation sector and how it will affect your company.
BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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