Mergers and Acquisitions: Reshaping the LTL Landscape in 2025
Mergers and acquisitions (M&A) are par and parcel for businesses. The practice allows companies to broaden their operations and customer base. They also don’t have to deal with building the infrastructure for an expansion; it’s already in place.
The logistics industry is no stranger to M&A. Major transportation companies have acquired smaller carriers and turned them into subsidiaries or have combined them into one entity. This is especially true for less-than-truckload (LTL) carriers, who have been the target of high-profile, lucrative deals in 2024 despite high interest rates and inflation.
Let’s look at three major M&A deals within the LTL this past year and see what they tell us about LTL shipping in the upcoming year.
Schneider National Acquires Cowan Systems
One of the more recent acquisitions of 2024, industry giant Schneider National bought Baltimore-based Cowan Systems, LLC, for $390 million in cash and $31 million in real estate on November 25. Schneider previously acquired Midwest Logistics Systems and M&M Transport, Cowan being their largest purchase yet.
All three companies Schneider acquired focus on dedicated trucking. By partnering with a single customer per contract, trucking companies achieve consistent routes, stable revenue, and protection from spot market fluctuations. Schneider aims to build its operations around customer-driven dedicated trucking, with Cowan being a critical step toward that goal.
The buyout does not mark the end for Cowan; it will continue operating as a subsidiary. It owns approximately 8,400 low-emissions, lightweight tractors designed for dedicated trucking, which will now make up 70% of Schneider’s fleet. Purchasing Cowan also provides Schneider $2 billion in dedicated contract revenues and a more extensive influence in the Eastern US.
Schneider’s acquisition of Cowan is a standard transaction for trucking companies. Larger companies want to expand their networks and fleets without wasting time and money building the internal infrastructure to do so. Buying smaller trucking companies guarantees all this, plus a diverse customer portfolio and opportunities for greater renown in the industry.
UPS Sells Coyote Logistics to RXO
A merger or acquisition is not always the end of the story. Like any precious object, they can be bought and sold repeatedly for many reasons. Companies will buy a subsidiary, hold onto it for some time, and then sell it to another corporation.
On September 16, 2024, freight brokerage RXO acquired Coyote Logistics from United Parcel Service (UPS) for $1.025 billion, making RXO the third-largest freight broker in North America. This deal gave RXO a $7 billion gross revenue with multiple avenues for growth. They also gained new shipping lanes while expanding network density on existing lanes.
Coyote and RXO also complement each other well despite their differences. Coyote handles large carriers serving large companies using private fleets; RXO uses smaller carriers and focuses on ecommerce and retail. There is little customer overlap, ensuring a lack of competition between the two.
But why did UPS, a well-known parcel delivery company, sell Coyote to RXO? UPS’s answer lies in the direction they want to take their company. After acquiring Coyote in 2015 to expand into freight brokering, a leadership change in 2020 shifted their priorities to improving their parcel business. This led to the sale of their LTL unit in 2021 and Coyote this year.
M&A deals demonstrate that a business’s journey doesn’t necessarily end after it has been acquired or merged. A company may be sold and resold as a subsidiary if its parent organization recognizes its value, even becoming an independent company again. The business landscape can be quite dynamic, especially when a company is profitable.
Forward Air Merges With Omni Logistics
While M&A deals can benefit both the acquirer and acquiree, they can also have drawbacks that heavily jeopardize both companies and their investors. Such is the case with Forward Air, which merged with LTL/multimodal carrier Omni Logistics.
The merger story is messy: the merger deal was initially proposed in August 2023, giving shareholders $150 million in cash and a 37.7% equity stake in Forward Air. Omni generated $1.6 billion in revenue and $181 million in adjusted earnings, making them a lucrative addition to Forward Air’s lineup of businesses.
Complications arose during negotiations due to Forward Air’s shareholders opposing the deal. Some members were excluded from voting on the agreement, while others thought the deal was not financially feasible for the company to handle. After further talks, Forward Air closed on a new agreement with Omni in January 2024, giving stakeholders $20 million and a 35% equity.
Despite the merger being completed, Forward Air encountered significant issues afterward. The company found itself in debt, which led to layoffs as a cost-cutting measure. They are still struggling financially, and shareholders are proposing the sale of Omni and other subsidiaries as a potential way to stabilize the company.
Forward Air’s merger with Omni Logistics is a cautionary tale for logistics companies considering an M&A deal; while it can be a profitable deal at first glance, it is also a financial risk that could ruin your operations instead.
What Can We Learn From These Transactions?
Businesses don’t consume one another just for the profits. Companies take on considerable financial risks when making M&A deals. That is why a merger or acquisition is such a big deal for logistics companies; if all goes well, the company can reach more customers and locations and offer new, expansive, customizable solutions.
However, these transactions speak to the vitality of the freight market and what may come in the future. Companies have slowed down on M&A deals in the past few years, but positive economic signs in 2024 have given trucking companies the confidence to make new purchases.
Although it’s unclear how the economy will change next year, the M&A deals made in 2024 indicate three key insights:
1. Trucking Companies Want to Expand Their Logistics Operations Despite the Economy.
2024 was an uncertain time for economic development. High interest rates, high inflation, and reduced freight volumes still plague the logistics industry. However, positive signs in the freight market have led freight companies to make riskier investments like M&A deals.
No matter how well the economy is doing, businesses planning to merge or acquire another company must ensure their finances can withstand such a deal. This also includes reevaluating the company’s finances and consulting shareholders.
2. More Resales Are Incoming.
Because the economy is facing uncertain times, companies are trying to drop dead weight where they can. This includes their subsidiaries, selling them to other companies to keep afloat.
It’s not always just because of the economy, however; some businesses are trying to shift priorities to streamline their operations, like UPS when it sold Coyote to RXO. Selling subsidiaries could be a smart choice to make to keep company values focused and to keep from making too many risky decisions.
3. Shifts in Political and Economic Spheres Could Affect M&A Deals.
With a new presidential cabinet entering the White House in 2025, we could also see shifts in the economy. While Trump has been favorable towards the trucking industry, he also favors high tariffs, which could cause counter-tariffs and affect international trade and freight shipping.
These factors could make it difficult for trucking companies to take risks, including mergers and acquisitions. Will we return to an M&A drought like a few years ago? Possibly, but we could also see more if the economy retains the new normalcy it has developed. All we can do is wait and see.
2024 highlights a dynamic industry at a crossroads. Trucking companies are taking various approaches to shape the future of freight, whether by leveraging the benefits of dedicated trucking, realigning priorities through resales, or navigating the complexities of mergers. These transactions emphasize the importance of adaptability and foresight in an ever-changing market.
Looking ahead to 2025, it is evident that the less-than-truckload (LTL) shipping landscape will continue to evolve due to mergers and acquisitions. While these deals present opportunities for expansion and innovation, they also come with significant risks and challenges. Companies must approach each transaction with strategic planning and a focus on long-term goals to ensure stability and success in an uncertain economic and political climate.
