Acquisition and merger activity in the third-party logistics and transportation markets is increasingly frenzied, as 3PLs and transport operators look to build the scale and provide the services needed to hook and land large shippers.
Talks and rumors of talks have increased following several major acquisitions, including the purchase of Norbert Desentrangle by XPO Logistics, Kuehne + Nagel’s acquisition of ReTrans and FedEx’s acquisition of GENCO and its bid for asset-based TNT Express.
Today, Bloomberg and then Reuters and the Wall Street Journal reported UPS is in talks to buy Coyote Logistics, a $2 billion logistics company, for $1.8 billion. All the reports were attributed to unnamed sources “familiar” with the negotiations. Bloomberg said the purchase of Coyote Logistics at that price would be the third-largest this year in the logistics space, but noted “no agreement has been reached and discussions could still fall apart.”
Regardless, the reports underscore the increasing need for logistics operators to not only build scale by acquiring companies but to provide nearly ubiquitous, precise levels of service for customers worldwide. This isn’t just the “one-stop shop” craze that motivated many acquisitions in the 1990s and early 2000s. Shippers want higher levels of service in multiple markets and a seamless interface between them.
They want 3PLs that not only deliver freight, but a high-quality customer experience that saves them money.
“We’re seeing growing desire to deal with pure players,” Shawn Boyd, executive vice president of sales and marketing for North America at DHL Global Forwarding, said in an interview after the company launched a U.S.-Mexico cross-border trucking service. “Our customers are reducing the number of carriers and providers that they use. If we can prove we can handle their business in one area, it makes the expansion into other areas easier. And they want to see us service the business in the same way.”
Whether it happens or not, the prospect of a UPS-Coyote hookup is interesting, and reports or rumors of talks and even talks about talks shouldn’t be surprising.
Coyote, founded in 2006 by entrepreneur and former American Backhaulers executive Jeff Silver, is one of the fastest-growing U.S. logistics companies, and is famed for “no excuses” customer service and innovation. The company added $1 billion to its revenue in the past two years and had a 680 percent compound five-year growth rate.
UPS Supply Chains Solutions had $9.4 billion in revenue last year, a 5.1 percent increase from 2013. Analysts say the division handles little brokerage, and an operation of Coyote’s caliber could deliver a real jolt to the its domestic operations. Likewise, UPS, in theory, could channel more international business into Coyote’s domestic freight lanes.
Coyote, which has grown rapidly by focusing on truckload freight, is also targeting less-than-truckload business. Last year the company named Tommy Barnes, former president of Con-way Multimodal, senior vice president of Coyote operations and president of its LTL business. UPS is the parent of the fifth-largest U.S. LTL carrier, UPS Freight.
It’s easy to see why UPS might be attracted to Coyote. A deal with Coyote could be the most transformative for UPS’s supply chain business since its purchase of Overnite Transportation, now UPS Freight, in 2005.
However, the success of any UPS-Coyote match would likely depend on the preservation of Coyote’s think-outside-the-box, work-and-play-hard, team-driven culture. The company’s young employees refer to each other as “Coyotes” and belong to “The Pack.”
Anyone wearing a suit and tie and carrying a briefcase in Coyote’s Chicago headquarters is probably a visitor, or lost. Analysts and consultants, including SJ Consulting Group’s Satish Jindel, question whether the two companies would be “a good fit.”
As Coyote gets bigger, passing the $2 billion mark in less than 10 years, maintaining its frenetic growth gets harder. According to earlier reports, Coyote already is considering an initial public offering this year that could raise several hundred million dollars. Going public is another option in the company’s long-term strategy to maintain and accelerate growth.