Trucking M&A … What to Expect in Today’s Environment Docs/About/Organization/NAFC... ·...

MOSS ADAMS CAPITAL LLC

Trucking M&A … What to Expect in Today’s EnvironmentOctober 19, 2015

2MOSS ADAMS CAPITAL LLC

Speakers

Paul Will Harman Wales Mark Scudder

CEO Managing Partner CEO

Celadon Moss Adams Capital Scudder Law Firm


Competitors

Logistics

Companies

Private

Equity

Strategic

Buyers

Consumers

LendersNew

MarketSegments

CEO/Company Management

Drivers

Growing

Regulation

Owner

Advisor

Connecting The Dots … in Today’s M&A Market

FamilyCustomers

New Technology

It’s Not Easy


The Owner Needs a Gameplan

• Whether or not you’re in a deal

• Understand the M&A market

• Stay up on Business Intelligence

• Know how you’ll be viewed

• Readiness & Preparedness

• Create and Protect Value

• Be Ready

Create a Gameplan for Value


2015 M&A Activity … Ahead of Last Year

YTDSeptember 30

+ 15% compared to 2014

Source: CapitalIQ

U.S. Transportation & Logistics Activity


3 YEAR

Source: S&P Capital IQ

(10.0%)

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Oct

-12

No

v-1

2

Dec

-12

Jan

-13

Mar

-13

Ap

r-1

3

May

-13

Jun

-13

Jul-

13

Sep

-13

Oct

-13

No

v-1

3

Dec

-13

Jan

-14

Mar

-14

Ap

r-1

4

May

-14

Jun

-14

Jul-

14

Sep

-14

Oct

-14

No

v-1

4

Dec

-14

Jan

-15

Mar

-15

Ap

r-1

5

May

-15

Jun

-15

Jul-

15

Au

g-1

5

Oct

-15

NASDAQTransportation

Index62.0%

Dow Jones Transportation Average Index

63.9%

S&P 500 Index39.7%

1 YEAR

Overall Returns … Higher for Transportation Group

60%+ over three years (vs S&P 40%)

NASDAQ Transportation Index

14.7% over one year (vs S&P 4.4%)


ONE-YEAR

Source: S&P Capital IQ

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

Oct

-14

No

v-1

4

Dec

-14

Jan

-15

Mar

-15

Ap

r-1

5

May

-15

Jun

-15

Jul-

15

Sep

-15

Oct

-15

LTL6.5x

Logistics13.9x

S&P 50010.4x

Railroads9.5x

Expedited & Air

9.4x

Truckload7.7x

Valuation Depends on Segment and Niche

Logistics 13.9x

Rail 9.5x

Expedited & Air 9.4x

Truckload 7.7x

LTL 6.5x

Note:Discounts to public multipleswill apply to smaller, private companies.


Unmasking EBITDA Multiples

Enterprise Value (“EV” or the “Deal Value”) $100,000,000

Operating Income $ 15,000,000

+ Interest $ 1,500,000

+ Depreciation $ 6,500,000

EBITDA $ 23,000,000

EBITDA “Multiple” 4.34x

Enterprise Value $100,000,000

- Debt 18,000,000

Equity Value $ 82,000,000


What Do Trucking Companies Sell For ?

"…well-run TL carriers typically don't get more than 5x their EV/EBITDA, while LTL carriers can go higher, but 5x is

generally considered fair, with 6x to 7x occasionally for large, stable linchpin LTL companies (ex: American Freightways

purchase in January 2001)… while Logistics companies can often go for 8x to 12x their EV…."

BB&T Capital Markets September 9, 2015

Buyer Target Approx. EBITDA Multiple

Approx. Rev.

Multiple

Tax Step Up/NOL

Potential Benefit

Heartland Gordon Trucking 5.0x 0.70x Yes Geography

Swift Central Refrigerated 4.5x 0.45x No Sector

Knight Barr-Nunn Transport 4.3x 0.95x Yes Niche

Forward Air Towne Air 18.0x 0.50x Yes Competitor

Apax Partners Quality Distribution 9.5x 0.80x No Cash Flow

Celadon Tango Transport NMF NMF Yes Capacity

Roadrunner Stagecoach <5.0x 1.0x Yes (prob) Niche

Answer … It Depends


Key Considerations … from Two Perspectives

Why Sell?? Retire, Monetize, Eliminate PGs

Replace Income, "Fair," "Mental Number"

Fight for vs. Buyer Choice

Retire vs Need a check

Grow, Fill in Gap, Defend

Market, Precedent, Return Threshold

Need vs rationalize

FounderRetention vs. Interfere

Step-Up Basis Minimize

Stand-Alone vs. Integrate Stand-Alone vs. Integrate

EquipmentSpec, Trade Prep, FMV vs Book

Drivers If Earn Out, No Negative ChangesQuality, Pay Plan, ELDs

Liabilities Part of the BusinessGAAP Accruals

Buyers Sellers

Price

Tax

Employees

Integration

Credit for New Units; Buyer Choice to Upgrade


Case Study Contrast –

Strategic Tactical

A&S / Taylor Robinson / Tango

• Targeted Niche • Add-On Acquisition

• Stand-Alone Operations • Integrate Immediately

• Growth Platform in Sector • Driver Capacity

• Strong Management • Management Not Ongoing Leadership

• Solid Profitability • Marginal Profitability

Multiple of Earnings Asset Value


Competitive Landscape Drives M&A

Where We Stand Today


Looking Forward

Future Competitive Landscape


2016 -- Multiple Participants Involved

Global Integrated Logistics Companies UPS/Fedex

Traditional Logistics Companies Going Vertical XPO

National Segment-Focused Trucking Companies Heartland

National Multi-Segment Trucking Companies Celadon

Regional/Local Trucking Companies Transforce

Specialty Trucking Companies Daseke

Private Equity Firms Apax

Focus of Company Example


2016 Forecast for M&A

Consolidation Will Continue

If You’re in the Industry … M&A will Affect You

Opportunities will Appear at Unexpected Times

Create Value, Protect Value … by Being Ready


Bridging the Gap … From Past to the Future

• Trailing Earnings

• Last Audited Statement

• Trailing Twelve Months

• Forward Earnings

• Transferrable Earnings

• Expected Synergies

• New Market Opportunities

Past Performance Predictable Future


Building Up Value

Strategic importance

to buyer

Tax benefits

Synergies

Outlook

PredictableEarnings

22

Full transaction value

Stand-alone valuation

Key Value Drivers

• Fleet

• Drivers

• Customers

• Contracts

• Management

• Technology

• Safety Record

• Growth

• Profitability


Readiness for Due Diligence

Anticipate.

Find. Gather. Organize.

Review before delivery.

No Surprises !!

Virtual Data Rooms

Multiple Parties

Controlled Access

Highly Efficient


Holding The Deal Together

There Goes the Deal

It’s Hard to Get a Deal Closed ... It Takes a Team


We Wish You Success !!!

When Your Time Comes

Trucking M&A … What to Expect in Today’s Environment Docs/About/Organization/NAFC... ·...

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