A few months into 2019, it is easy to start spotting some of the trends we should expect in the trucking industry over the coming year. Overall, growth is expected to slow as compared to what we saw in 2018, which appeared to be a banner year for trucking, particularly in the months after July.
Congress is also expected to make spending on infrastructure a priority in 2019. However, it may not be enough to continue to bolstering the trucking and freight industries. So what does this mean for mergers and acquisitions over the coming months? Here’s what we predict and what we’re already seeing for 2019:
Slowing Freight Activity
According to the Cass Freight Index, the first quarter of 2019 saw the first decline of freight volume in the United States since the trucking recession of 2015. This is likely the result of decreased consumer spending over the past few months. With less freight needing shipment, the industry could begin to contract after a period of strong growth.
Decreased Production of Class-8 Trucks
In 2018, we also saw a historic surge of Class-8 trucks being purchased by shippers and therefore, their production increased as well. But in February of this year, purchase rates plunged by 58% compared to a year prior. Closely tied to slowing freight activity, the decrease in production of these trucks will continue if freight shipments do not begin to increase over the next few months.
Shortage of Drivers
Though unemployment rates throughout the broader economy are lower than previous years, the long haul trucking sector has experienced consistently high turnover for decades, and that is not expected to change as a result of generally poor recruitment strategies and low wages. Owners and managers could combat these effects, keeping their workforce engaged, by increasing wages and implementing better recruitment practices to attract new drivers that may have a longer tenure in these positions.
Given these indicators, we can assume that the boom of merger activity that occurred in 2018 will most likely begin to slow throughout the rest of this year. Although we expect some mergers or acquisitions to occur and continue to decrease the competition, they will almost certainly occur less frequently. This is due to the fact that mergers and acquisitions rely on having strong, healthy companies in a place to purchase other smaller or weaker business. If the entire industry is negatively impacted by slowing freight activity, decreased Class-8 production, and driver shortages few companies will be in a position of strength to become buyers.
In fact, we have not seen any notable activity within the trucking industry announced yet in 2019. But this may actually be a factor of the sheer number of mergers and acquisitions that took place in 2018. It could be that after these transactions took place, those stronger companies need time to integrate their new purchases before making another. Our team predicts that if more mergers or acquisitions are going to occur in 2019, they will likely be finalized or announced in the latter part of the year.
If selling your company or purchasing another is part of your 2019 strategy, however, there are a number of considerations you should evaluate prior to making any resolute decisions. For a sale in particular, you will need to determine the valuation of your company in order to evaluate any offers that are made to you. Fortunately, The Hatteras Group can help you with all of these matters.
About The Hatteras Group
The Hatteras Group is a collaborative team of professional intermediaries and advisors that guide business owners and entrepreneurs as they navigate the complex process of mergers or acquisitions in the transportation and logistics industry.
Generally, we work with those companies whose annual revenues are $5MM to $100MM. If you are trying to value your business in an effort to sell it, we can help you audit the health of your company with an advanced 10-point evaluation checklist to determine if there are any issues that could potentially derail a sale in the future. Contact us today for more information.