Transportation & Logistics. Strategic Market Insights Q Report

Transcription

1 Strategic Market Insights 2017 Report

2 G2 Insights Blockchain Simplified The Transportation & Logistics industry continues to be shaped by technology and has begun to explore the use of blockchain. Below are G2 s insights and observations: As the Industry continues to embrace the Internet-of-Things (IoT), forward thinking providers have begun to assess the role of blockchain technology within the existing IoT ecosystem. Spearheaded by Blockchain in Transport Alliance (BITA), a 200+ strong member organization launched in August 2017, a diversity of providers, ranging from brokers to carriers, to vendors, have recognized the promise of introducing blockchain to a largely high transaction volume marketplace. Potential uses for the technology are: performance history records, capacity monitoring, gray trailers, dispute resolution, fraud detection, risk management, operational / route transparency, and decreased regulatory risk. Among the members that have joined BiTA include UPS, SAP SE, FedEx, Penske, Salesforce, ECHO, YRC Worldwide, and Schneider. Source: Blockchain in Transport Alliance, Internet of Things Institute Blockchain at its simplest form, is nothing more than a digital, independent, transaction ledger. While recently synonymous with cryptocurrencies, Blockchain s potential lies in its ability to eliminate physical documentation as well as provide transparency across transacting parties. Looking past the clouds of buzzwords associated with the new technology, when boiled to its core functionalities, Blockchain has the potential to be a key disruptive technology within the Transportation and Logistics industry. A report published by Morgan Stanley Research pegs the estimated revenue opportunity for Blockchain technology within Freight Transportation to be ~$500B (global truck brokerage ~$160B, freight forwarding ~$160B, truck fuel spend ~$175B, and supply chain management software ~$10B). Applications of Blockchain Technology Distribution tracking Litigation support Contracts & invoicing Maintenance history Performance history Quality assurance Blockchain Ledger Technology Fraud detection Capacity monitoring Compliance 2

3 G2 Insights Blockchain Simplified (cont.) Smart Contracts Within the Transportation and Logistics Industry, Blockchain technology can immediately be deployed as a substitute for contract execution, or smart contracts. The decentralized nature of Blockchain ledger, or an independent system capable of preventing data alteration, presents immense value through its potential to reduce risk and cost, improve accountability, and expedite payment processing. In other words, Blockchain has the ability to standardize payments, verify product quality, optimize cargo capacity, all in real time. Smart contracts utilize the ledger technology by tracking the supply chain through a series of checkpoints (similar to RFIDs being scanned from location to location) and self-executing payment of the delivery upon final verification. With most all human intervention eliminated from the record keeping process, no user is more trusted than another, no official copy is held by one or another, and confidentiality is maintained. Customer Carrier Point 1 Point 3 Carrier Customer Shipper Contract Terms Set by Parties Point 2 End Point Contract Self- Executes, Funds released Shipper Figure 2: Illustrative smart contract execution utilizing blockchain technology Supply Chain Benefits In addition to being used as a standardization of payments, Blockchain has been used to track the quality of goods, reduce processing costs, and prevent theft (or at least track where and when it happened). Blockchain technology may play an important role within the Food & Beverage and Automotive industries, tracing defective or contaminated products to its origins through distribution channels by the minute. This would save hundreds of millions in recall costs as well as pinpoint potential cause. Listed below are case studies for how Blockchain technology has already been utilized across the supply chain. Provide transparency of container content and shipments, track parts origination and maintenance history, enforce service level agreement (SLA) Prevent fraudulent copies of letters of credit, tokenize assets, utilize smart contracts to self-execute upon completion of delivery in real-time Reduce inaccuracy of passenger information systems, identify human error, increase fraud protection and security Provide transparency of container content and shipments, track parts origination and maintenance history, enforce service level agreement (SLA) Source: Morgan Stanley Research, BiTA 3

4 G2 Insights Blockchain in Simplified (cont.) Types of Implementation Still in its infancy, Blockchain technology in the industry has yet to be adopted across subsectors or commercially offered. Thus far, three main implementation models have been piloted: Piecemeal Pay-as-you-go Forward thinking companies that don t necessarily have the scale or expertise to produce a Blockchain functionality alone will contract with a 3 rd Party provider to build, implement, and customize the technology in a piecemeal fashion. Customize and Utilize Companies with requisite internal resources design an in-house Blockchain functionality to address a company-specific issue. Build, Standardize, Commercialize Companies may internally develop a Blockchain functionality and transfer (commercialize) the platform to a 3 rd party provider. As the technology continues to grow, mature, and unlock new potential, middle market providers in the industry will most likely utilize the Piecemeal Pay-as-you-go approach until larger corporations commercialize and transfer in-house Blockchain technology. Blockchain in Transport Alliance (BiTA) To facilitate collaboration and facilitation of Blockchain technologies, Blockchain in Transport Alliance was recently formed in August The 200+ strong member base boasts a wide variety of Industry leaders across different subsectors from trucking, to shipping, to brokerage, and supply chain management. The Company aims to drive standards and innovation within the Blockchain in Transport movement by facilitating collaboration between larger corporate entities such as Maersk, SAP, and FedEx. Themes and motifs on BiTA s docket as of late include: Performance History Vehicle Maintenance Quality Assurance Compliance Capacity Monitoring Payment Pricing Fraud Detection Theft Prevention Mike Vincent, the Executive Vice President of Transrisk, BiTA s corporate parent, provided further insight into BiTA s future and key Blockchain innovations. Mr. Vincent commented that by guiding discussion and setting standards for the Blockchain movement in the Industry, BiTA will play a pivotal role in driving innovation and collaboration across its blue-chip members, expediting the process of unlocking the problem-solving capabilities of Blockchain. As such, the Alliance has narrowed down its focus to the aforementioned themes and motifs. BiTA is funded through a annual membership and regularly holds education and collaborative events across all industry participants. The Alliance will look to continue building its well-equipped membership and tap into more traditional, middle market service providers. Source: Transportation Topics, Morgan Stanley Research, BiTA 4

5 Sector Summary The total T&L M&A transaction volume for remains consistent with the previous quarter. Logistics and Trucking subsectors remain the most active in the industry, logging 12 and 8 total transactions respectively. Within the Logistics subsector, Third Party Logistics, Freight Forwarding, and Same-day / Final Mile providers have emerged as popular targets throughout the quarter Within the Trucking subsector, heavy-haul and specialty distribution providers represent the majority of this quarter s transaction targets. The summary table below references select public companies identified for each of the industry s key segments: Logistics, Marine, Rail Services, and Trucking. Public valuations range from ~7x EBITDA for Trucking companies to ~11x EBITDA for Rail Services providers. Sector Number of Selected Companies Median Enterprise Value (MM) FY LTM 2 Median EV / EBITDA Revenue Growth Median Revenue Growth EV / EBITDA Logistics 19 3, % 7.8% 1.1x 10.4x Marine 16 3, % -5.3% 1.1x 9.7x Rail Services 11 13, % 8.5% 1.7x 10.8x Trucking 18 1, % 2.3% 1.1x 7.0x 1 Compared with values at September 30, LTM Multiples as of September 30, 2017 Sector Summary in Millions USD (converted where necessary) Data sourced from S&P Capital IQ on September 30, 2017 Global Trade Review 5

6 Selected Industry Deals 2017 Several notable transactions have already been completed or announced in the Transportation & Logistics industry through Kane Is Able to acquire Vintners Logistics (Pending) Kane is Able, Inc., a third party logistics firm catering to the food & beverage, health & beauty, and retail industries, is in talks to acquire Vintners Logistics, a provider of warehousing and transportation for food and beverage products for wineries and food processing companies. Expected to close in the first quarter of 2018, the acquisition would be in line with Kane s strategy to strengthen its position as the leading logistics and distribution provider to the wine and spirits industry. Channel Distribution Corporation acquired by St. George Trucking (December 2017) St. George Logistics, a specialty third party logistics and trucking provider and portfolio company of private equity firm Windpoint Partners, announced its acquisition of Channel Distribution Corporation (CDC) on December 14 th, CDC provides ocean and air CFS solutions, centralized examination station services, and general order warehousing in the Chicago area. The acquisition would allow St. George to establish a regional headquarters in the Midwest region in Chicago as well as doubling its capacity in the area. Additionally, the acquisition would allow St. George to improve efficiency and enhance customer service bandwidth. Details of the transaction were not disclosed. Apex Logistics acquired by GlobalTranz Enterprises (December 2017) Apex Logistics Group, a provider of enterprise shipping and logistics services, was acquired by GlobalTranz Enterprises, a provider of tech-enabled freight management solutions and portfolio company of private equity firm Providence Equity. Apex Logistics services a blue-chip customer base, including Anheuser Busch, Del Monte, JR Simplot, Kroger, Niagara, Sysco, and US Foods through its temperature-controlled services. The acquisition will allow GlobalTranz to expand its market share in the cold-chain logistics arena as well as acquire Apex s blue-chip client relationships. Details of the transaction were not disclosed. Keen Transport, Inc. acquired by Wallenius Wilhelmsen Logistics ASA (OB:WWL) (December 2017) Keen Transport Inc., a specialty trucking provider with 14 High & Heavy Equipment Processing Centers (EPC s), was acquired by Wallenius Wilhelmsen Logistics (WWL), an international provider of ocean transport, supply chain management, terminal services, inland distribution, and technical services. WWL s acquisition of Keen allows the company to become the clear market leader in the US H&H Equipment Processing space. While details of the deal were not disclosed, Keen Transport reported $82MM in 2016 revenues. 4SameDay acquired by 1 st Choice Delivery (November 2017) 4SameDay, a comprehensive same-day logistics service provider for the pharmaceutical, long-term care, entertainment, financial, print, advertising and media industries, was acquired by 1 st Choice Delivery, a Midwest-based full service delivery and logistics company. 4SameDay s asset-light operating model and proprietary technology will allow 1 st Choice Delivery to expand its market share within the final mile delivery sector. Details of the transaction were not disclosed. Moore Freight Service / Tennessee Steel Haulers / Roadmaster Group acquired by Daseke (August 2017) Daseke, one of the largest flatbed haulers in North America, acquired three specialty trucking carriers, Moore Freight Services, a specialty glass hauler, Tennessee Steel Hauler, a specialty steel hauler, and Roadmaster Group, a specialty ammunition and explosives carrier. The acquisition allows Daseke to expand its product offerings as well as increase its margin profile. It is expected that Daseke will surpass $1B in revenues following the acquisition. Source: Transportation Topics, S&P Capital IQ 6

7 EV / EBITDA Index Transportation & Logistics Market Indicators Market Index Trends The Transportation sector has recovered considerably over the last 12 months, outgrowing the S&P500 over of % 110.0% 90.0% 70.0% 50.0% 30.0% 10.0% (10.0%) '12 '12 Q1 '13 Q2 '13 '13 '13 Q1 '14 Q2 '14 '14 '14 Q1 '15 Q2 '15 '15 '15 Q1 '16 Q2 '16 '16 '16 Q1 '17 Q2 '17 '17 '17 S&P 500 Transportation (Industry Group) S&P 500 Last 5 Year EV / EBITDA Trend by Industry Data sourced from S&P Capital IQ on September 30, 2017 Though still tracking below the S&P 500 EV/EBITDA multiple average, the industry has begun to slowly increase its averages since 2016, led by the Logistics segment followed by Rail and Trucking segments. The Marine subsector has seen a slight decline over the last quarter. 15.0x 10.0x 5.0x 0.0x Q1 '12 '12 Q1 '13 '13 Q1 '14 '14 Q1 '15 '15 Q1 '16 '16 Q1 '17 '17 S&P 500 Logistics Marine Rail Services Trucking Data sourced from S&P Capital IQ on September 30,

8 Dry Powder ($BN) Funds Raised Technology & Business Services M&A Activity Middle Market Though mid market deal volumes have come down off historical highs, frothy debt availability continues to drive premium valuations M&A by the Numbers 28.2% 10.6x US Median EBITDA Multiple $45.3MM Median Deal Size 71.8% Sponsored Non-Sponsored 14% YoY Increase in Median EBITDA Multiple M&A transaction multiples are the median North American M&A activity independent of target / acquirer industry and enterprise value. The dataset has been restricted to multiples between 0.0x and 30.0x EBITDA; *Sourced through Pitchbook s 2017 Report. Private Equity Dry Powder $500 $450 $400 $350 $300 $250 $200 $ $599 $ $ $ $ $ $1, $100 $ $ Funds Closed Dry Powder 0 *Sourced through PitchBook 2017 Report 8

9 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. Company Title Role CEO EVP COO COO CEO EVP Restructured operations of international freight forwarder and acquired 11 companies in 18 months before selling the parent at 4.5x premium. Doubled the size of company sales and EBITDA in 18 months before selling at a 2.5x premium. Restructured and recapitalized the company, before selling for $400 million. Restructured platform company for a private equity group before selling for $658 million representing a 6x return on initial investment. Co-founded the business in 2000, building the company from start-up to $150 million in revenues in 18 months then sold to private equity firm in Built Ryder s 3PL division from $100 million revenues in 1988 to $2.4 billion in Ron Lentz Practice Leader Transportation & Logistics G2 Overview Select On-going G2 Projects Project Hoosier Operational & Financial Restructuring Third Party Logistics and Freight Management Project Hoosier G2 is currently advising a third party logistics and freight management company in an operational restructuring. G2 was brought in to provide an objective evaluation and recommendations to improve the company s financial projections, cash flows, and liquidity position. Project Panther Sell-Side Third Party Logistics and Supply Chain Distribution Project Panther G2 is currently advising a leading integrated supply chain and logistics provider catering to both Canadian and U.S. customers. The Company provides warehousing and distribution, dedicated contract carriage, international transportation management, and domestic transportation management. 9

10 Reference G2 Team Ron Lentz, Managing Director Jeffrey Unger, CEO Theodore Bang, Analyst Term Definition Revenue Total revenue from the sale of goods and services rendered during the reporting period, in normal course of business, reduced by sales returns and allowances, and sales discounts. For banks, this item is defined as net interest income after loan loss provisions EBITDA Market Cap Long-Term Debt Net Debt Earnings before interest, taxes, depreciation, and amortization. Calculated as Revenue Expenses, excluding interest, taxes, depreciation and amortization Market value of a company using most recently reported basic weighted average shares outstanding. 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 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 liquid assets. Calculated as Total Debt Cash & Cash Equivalents and Short Term Investments Enterprise Value Enterprise Value represents the combined economic value of a company as of the most recent fiscal year end. Calculated as Diluted Market Capitalization + Total Debt + Minority Interest + Preferred Stock Cash and Short Term investments P/E A valuation ratio of a company stock price compared to its per share earnings. Calculated as Market Price / Earnings per Share for the last annual period Tangible Book Value Total Shareholder s Equity Goodwill and Intangible Assets For more information about G2, please visit: Our corporate headquarters is located at: 535 Boylston Street, 11 th Floor, Boston, MA Boston Chicago Indianapolis Naples San Francisco 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. 10