News / US LTL and trucking sectors steering toward further consolidation

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Pitt Ohio, the 13^th largest LTL carrier in the US rolled into the new year with the acquisition of Sutton Transport (ranked 24^th) for an undisclosed sum.

And according to industry insiders, more consolidation will follow in the coming months.

The Sutton acquisition adds 10 terminals across eight states to Pitt Ohio’s footprint, and Sutton’s operations will be merged into its Dohrn Transfer LTL unit, after an initial period.

“This acquisition aligns perfectly with our strategic vision to enhance service for our customers by increasing shipment density within our footprint,” said Chuck Hammel, president of Pitt Ohio.

Cliff Sutton, president of the smaller carrier, noted that as consolidation was playing out in the LTL sector, Pitt Ohio was “the most suitable entity to purchase our company, ensuring the interests of both our customers and our employees are protected”.

In October, Chicago-based Moran Transportation bought RMX Freight Systems, following the takeover of Dependable Highway Express by Knight-Swist.

However, the LTL sector looks a much less likely arena for mergers and acquisitions than the highly fragmented trucking market.

According to ShipMatrix data, the top 40 LTL operators command 84% of the sector’s revenues. The relatively small number of operators, combined with the high entry barriers, has resulted in relatively solid pricing discipline over the past couple of years, while rates in the truckload sector plunged.

But Satish Jindel, president and founder of SJ Consulting and ShipMatrix, expects more consolidation this year – probably three smaller players being taken over by larger operators. Small LTL firms are struggling with costs and technology, he pointed out.

“Ten years ago the barrier to the LTL market was having terminals; now it’s having terminals, technology and talent,” he added.

He explained that an LTL firm with revenues of around $30m to $40m, possibly family-owned, did not have the necessary technology and cannot attract talent. A bright expert is not going to join a company where his plans may be overruled by a member of the family that owns the business, he said.

Increasingly, small operators in the sector are struggling with rising operating costs and cannot achieve margins that could keep them profitable, argued Mike Moran, president of Moran Transportation. He also expects to see more consolidation.

Meanwhile, the truckload business has seen large numbers of small truckers fold over the past year, with more expected to follow this year, notwithstanding some indications that the market may have hit bottom. One of the larger recent acquisitions came in late November, when Schneider National bought Cowan Systems for about $390m.

Market observers like KPMG and Goldman Sachs are predicting increased M&A activity this year. AIT Worldwide Logistics rang-in the new year with a takeover of St Louis-based Krupp Trucking, a forwarder with a fleet of more than 60 trucks and specialising in moving high-value goods for the technology sector, including as an independent contractor for Seko Logistics.

“This partnership combines AIT’s vast global network and vigorous governance with Krupp’s high-quality service and logistics solutions. Together, we’re well positioned to elevate the customer experience, especially when it comes to providing ‘white glove’ logistics services for the hi-tech industry,” said AIT chief development officer Ray Fennelly.

Expect more such announcements over the coming months.