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G2 Transportation & Logistics Strategic Market Insights - Q1 2018 Report
G2 Transportation & Logistics Strategic Market Insights - Q1 2018 Report
The realities of the Amazon effect permeate throughout the E-Commerce eco-system, as their delivery
criteria has set the industry standard. Accordingly to a survey conducted by Alix Partners of 1,000
shoppers, more than 50% were Amazon Prime members who expect 2-day shipping. The same survey
found that more than 95% of shoppers stated that free shipping impacted purchase decisions. As
millennials age, start families and utilize E-Commerce as their primary means of retail purchasing,
vendors must keep pace with Amazon:
Accounted for 44% of all U.S. E-Commerce sales or 70% of E-Commerce growth in 2017
Captured 4% of all 2017 U.S. retail sales
$8B of electronics sales was largest division / Amazon private label reached $450MM
Efficiency and scalability are key to successfully compete in today’s retail environment. Vendor fulfillment
costs have increased by at least 9% of net sales over the last 11 years, prompting change. Some
companies are seeking to collaborate through partnerships and alliances to reduce the capital investment
required to develop additional capabilities, capacity or density. Others will rely on acquisitions to
accelerate the implementation of new tactics to strengthen their market position. Regardless of the
approach, we expect to see a significant amount of change as supply chains around the world seek to
keep up with the evolution of E-Commerce.
2006 2017
Total Cost
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Transportation & Logistics
G2 Insights – Final Mile and Expedited Logistics M&A
File mile and expedited logistics are keys segments impacted by E-Commerce with significant M&A
activity. Strategics seek to expand capabilities into specialized services, achieve additional scale or enter
new geographies. Private equity investors view final mile and expedited logistics as high growth sectors
that offer opportunities for significant returns.
Over the last twelve months, there have been more than 21 M&A transactions in North America within
the final mile and expedited logistics space. Listed below are examples of recent transactions which
include several retailers aggressively pursuing opportunities to accelerate the development of their E-
Commerce platforms by acquiring established final mile capabilities.
2) Select Private Equity Platform and Add-On Investments within the Final Mile Sector
a) Greenbriar Equity Group acquires Lasership, Inc. (04/16/2018) – Greenbriar Equity Group,
an established private equity firm in the transportation and logistics space, acquired
Lasership, a regional asset-light provider of last mile services across a variety of industries.
b) Northern Pacific Group recapitalized 1st Choice Courier (11/14/2017) – Northern Pacific
Group, a Minnesota-based venture and growth equity firm, recapitalized 1st Choice Delivery
company, a full-service final mile delivery company, and acquired, 4SameDay Couriers, a
regional courier service provider.
c) DoorDash, Inc. (venture backed) acquired Rickshaw, Inc. (NYSE:9/14/2017) – DoorDash
Inc., a food delivery courier backed by reputable venture funds such as SoftBank, Sequoia
Capital, GIC, and Kleiner Perkins Caufield & Byers, acquired Rickshaw, Inc., a same-day local
delivery services company transporting food, gifts, meal subscriptions, and other consumer /
E-Commerce related packages. Rickshaw was previously backed by Y Combinator
Management.
d) Quick International Courier, a Jordan Company platform company, acquires Unitrans
Inc. (08/17/2017) – Quick International Courier, a platform company of the Jordan Company,
a large private equity firm well-versed in the transportation and logistics space, acquired
Unitrans, Inc., an expedited intermodal, ocean, air, and brokerage firm. Unitrans was
previously a subsidiary of Roadrunner Transportation Systems Inc. (NYSE:RRTS) and was
acquired for $95MM.
Source: S&P Capital IQ
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Transportation & Logistics
G2 Insights – The Future of Final Mile
Fleet owners have long since sought ways to increase fuel efficiency and reduce maintenance costs. A
movement toward electric medium duty, short haul delivery vehicles provide fleet owners with an innovative
alternative to traditional fossil fuel-dependent vehicles.
The Time for eTrucks is Now
With considerable time and capital invested toward developing an electric delivery vehicle alternative,
eTrucks have developed to where total cost of ownership is on par with diesel and alternative powertrains.
Infrastructure is increasingly available and emission standards have created regulatory tailwinds. Even
though some challenges remain for full fledge adoption, electrification is happening fast and NOW.
UPS is a leading player partnering with Workhorse Group (U.S.) and Arrival (UK). In 2017, UPS
announced orders of 50 electric vehicles from Workhorse, an eTruck manufacturer that estimates its
technology could improve fuel efficiency by more than 400%. Recently, UPS announced another test
program of 35 vehicles from Arrival, a UK-based electric van producer, in London and Paris. The Company
disclosed it has invested more than $750MM in alternative fuel and advanced technology vehicles since
2009. Other large players such as USPS, Penske, DHL and Ryder are all following suit and have ordered
trucks for pilot programs. Manufacturers such as Daimler and Mercedes Benz are actively testing new
capabilities across truck classes to influence the next standard of efficient vehicles.
Workhorse and UPS have collaborated to deploy 50 electric, zero-tail pipe emission delivery trucks (left) while Daimler announced its
roll out of its Class 4 Fuso eCanter all-electric truck (right). Source: UPS, Workhorse, Daimler, Trucking Info
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Transportation & Logistics
Selected Industry Deals Q1 2018
The first quarter of 2018 has been active, with a total of at least 45 deals announced and closed.
Driving factors of deal flow were: 1) capacity expansion to address the ELD mandate and driver
shortage, 2) geographic expansion, 3) addition of new capabilities, namely the in E-Commerce & final
mile segments, and 4) an overall positive macro-economic environment. Below are select few
transactions completed during the period.
St. George Trucking & Warehouse acquires Freight Force (March 2018) – St. George Logistics,
a specialty third party logistics and trucking provider and portfolio company of Windpoint Partners,
acquired Freight Force, a first and final mile delivery services provider. The acquisition allows St.
George to leverage local and regional motor carriers in over 52 metro areas as well as service more
than 2,200 freight forwarders and third party logistics providers. The investment is just one example
of trucking and warehousing providers expanding capabilities into the final mile segment to address
the significant growth and opportunity in E-Commerce sales.
American Industrial Partners acquires Rand Logistics (March 2018) – American Industrial
Partners, a global private equity firm with over $4.1B in AUM, acquired Rand Logistics, a provider of
bulk freight shipping services throughout the Great Lakes Region. The acquisition follows a pre-
packaged Chapter 11 Plan which leaves the company with a de-levered balance sheet and lower
interest expense obligations. American Industrial Partners expects Rand to continue its market
leading position in providing shipping and other logistics services of critical raw materials within the
Region.
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Transportation & Logistics
Market Indicators
The Transportation sector has recovered considerably over the last 12 months, outgrowing the S&P500
over Q1 of 2018.
130.0%
110.0%
90.0%
70.0%
Index
50.0%
30.0%
10.0%
(10.0%)
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
'12 '12 '13 '13 '13 '13 '14 '14 '14 '14 '15 '15 '15 '15 '16 '16 '16 '16 '17 '17 '17 '17
Though still tracking below the S&P 500 EV/EBITDA multiple average, the industry has begun to slowly increase
its averages since Q4 2016, led by the Logistics segment followed by Marine and Rail segments. The
fragmented trucking sector has seen an increase linked to rising prices and capacity constraints.
15.0x
10.0x
EV / EBITDA
5.0x
0.0x
Q1 '13 Q3 '13 Q1 '14 Q3 '14 Q1 '15 Q3 '15 Q1 '16 Q3 '16 Q1 '17 Q3 '17 Q1 '18
S&P 500 Logistics Marine Rail Services Trucking
Data sourced from S&P Capital IQ on March 31, 2018
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Transportation & Logistics
Selected Ongoing G2 Projects
G2 has a robust backlog of mandates ranging across its sell-side, buy-side, capital
markets, and restructuring service offerings.
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G2 Overview
Ron Lentz, Managing Director
G2 Capital Advisor’s Transportation & Logistics industry Practice Leader, Ron Lentz, brings 25+ years of
C-level leadership and operating experience to the Transportation & Logistics practice group.
G2 Overview
Christopher Casteleyn, Vice President
G2 Capital Advisor’s Transportation & Logistics industry Vice President, Christopher Casteleyn, brings 13+
years of experience in finance, specializing in providing advisory services for merger, acquisition, and
divestiture transactions as well as strategic assessments. Christopher has significant experience executing
cross-border and private company transactions within the Transportation & Logistics practice group.
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Reference
G2 Team
Ron Lentz, Managing Director Jeffrey Unger, CEO
rlentz@g2cap.com junger@g2cap.com
630.362.8317 617.918.7929
Term Definition
Total revenue from the sale of goods and services rendered during the reporting period, in normal course of
Revenue business, reduced by sales returns and allowances, and sales discounts. For banks, this item is defined as net
interest income after loan loss provisions
Earnings before interest, taxes, depreciation, and amortization. Calculated as Revenue – Expenses, excluding
EBITDA
interest, taxes, depreciation and amortization
Market value of a company using most recently reported basic weighted average shares outstanding.
Market Cap
Calculated as Market Price (as of period end) * Basic Weighted Average Shares Outstanding
Sum of the carrying values as of the balance sheet date of long-term debt with a maturity beyond one year or
Long-Term Debt
the normal operating cycle, if longer
Net Debt shows the company’s overall debt situation by netting the value of debts with cash and other similar
Net Debt
liquid assets. Calculated as Total Debt – Cash & Cash Equivalents and Short Term Investments
Enterprise Value represents the combined economic value of a company as of the most recent fiscal year end.
Enterprise Value Calculated as Diluted Market Capitalization + Total Debt + Minority Interest + Preferred Stock – Cash and Short
Term investments
A valuation ratio of a company stock price compared to its per share earnings. Calculated as Market Price /
P/E
Earnings per Share for the last annual period
Tangible Book Value Total Shareholder’s Equity – Goodwill and Intangible Assets
The information included in this Presentation is not a complete analysis of all material facts regarding any company,
industry, or security and does not constitute investment advice. Opinions expressed or implied by the materials here
presented reflect only the judgement of its author as of the date of the Presentation and is subject to change without
notice. The information in this Presentation has been obtained from sources which G2 generally considers reliable, but
we make no representation or warranty, express or implied, as to the accuracy or completeness of any information
herein. This Presentation has been prepared for informational purposes only and upon the express understanding that it
will be used only for the purposes set forth in the Section captioned G2 Overview above. G2 expressly disclaims any
and all liability which may be based on such information, errors therein or omissions there from. Securities offered
through Western International Securities, Inc. Member FINRA & SiPC. G2 Securities and Western International
Securities are separate and unaffiliated entities.
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