Description
The Logistics M&A Market Today
Copyright © 2007 by BG Strategic Advisors
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means —
electronic, mechanical, photocopying, recording or otherwise —without the permission of BG Strategic Advisors.
The Logi st i c s M& A Mar k et
Today: Pr of i l es of Leader s,
and St r at egi es f or Suc c ess
CSCMP 2007
Benjamin Gordon
Managing Director
BG Strategic Advisors
September 22, 2007
Page 2
Agenda
• Winner-Take All Marketplace
• Impact of Value-Added Services on Logistics Companies
• The Logistics Land Grab: Implications for Value-Added
Services
• Good-to-Great: Successful Transformations
• Strategies for Winners
Page 3
Winner-Take All Marketplace
Page 4
The Highest-Paid Player in Baseball, 1984
versus 2004: A Tale of Two Left-Fielders…
Page 5
…and Two Very Different Paychecks
Page 6
Representative Clients / Relationships
Page 7
Two Logistics Markets
The outsourced third-party logistics market in the United States is forecast as a
$120 billion industry and is growing at approximately 15% annually
$34
$45
$65
$77
$104
$120
$0
$20
$40
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1997 1999 2001 2003 2005 2007E
Page 8
Growing Divergence between Low Value
and High Value Logistics Companies
Page 9
Growing Divergence between Low Value
and High Value Logistics Companies
* Note: for public warehousing, only 10% anticipate a double-digit increase
Page 10
The Discount that Low-Value Companies Receive is Paralleled
in the Public Markets, where Trucking Companies Receive
Half the Valuation of Logistics Companies
LTM Median EBITDA Multiples
The median EBITDA multiple for a logistics company is much higher than that of
both truckload and LTL
Source: Publicly available market data
13.5
6.9
5.5
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Logistics Truckload LTL
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Page 11
26.8
22.7
17.4
12.2
14.1
12.0
18.9
15.5
18.3
0.0
6.0
12.0
18.0
24.0
30.0
36.0
LTM 2007E 2008E
P
/
E
M
u
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Logistics Median
Truckload Median
LTL Median
…As Well as Price to Earnings Ratios
Median P/E Multiple Comparison
The median P/E multiple of a logistics company outpaces that of both truckload
and LTL
Note: The increase in the LTL median P/E multiple in 2007E is attributed to a decrease
in EPS for all of the firms considered in the LTL universe that year
Source: Publicly available market data
Page 12
26.4%
26.0%
23.9%
22.0%
16.5%
16.1%
14.0%
13.1%
11.3%
9.6%
6.7%
0.1%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
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Drivers Behind the Higher Valuations of
Logistics Companies
On average, logistics companies have a higher free cash flow return on average
total capital than truckload companies
Source: Bear Stearns Airfreight & Surface Transportation
Logistics
TL
2007E FCF Return on Avg. Total Capital Comparison
18.9% Logistics Average
10.7% TL Average
Page 13
Market Overview
Fragmented Logistics Industry:
Non-Asset-Based Surface
Transportation
Air/Ocean Freight
Forwarding
Asset-Based
Transportation
C. H. Robinson
Transplace
Ryder Logistics
Hub Group
Schneider Logistics
UPS
Cat Logistics
RR Donnelley Logistics
Pacer
Penske
Menlo
NYK Logistics
Exel (Mark VII)
FedEx
Pittsburgh Logistics
Landstar
Transport Industries
$18.9 B
Exel Americas (T&B)
Ingram Micro Logistics
UPS
APL (GATX)
KN (USCO)
Americold
TPG (TNT/CTI)
CAT Logistics
Logistics Insights
Genco
Ozburn-Hessey Logistics
Standard
Value-Added Warehouse
$12.7 B
UPS
(Menlo, Fritz)
DHL
(Danzas, AEI)
EGL (Circle)
BAX Global
Expeditors
GeoLogistics
UTI
Maersk Logistics
Phoenix International
Panalpina
KN
Kintetsu World Express USA
Hellmann Worldwide Logistics - USA
$9.4 B
Ryder
Dedicated
Penske
Logistics
Schneider
Dedicated
JB Hunt Dedicated
Averitt Express
Ruan Logistics
SIRVA Logistics
Swift Transportation
$7.9 B
0%
20%
40%
60%
80%
100%
20% 40% 60% 80% 100%
Total = $48.8 Billion
2
0
0
4
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R
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v
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n
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s
Note: Only includes the top-50 companies, or $49 billion.
Total U.S. logistics market is actually over $75 billion.
U.S. Logistics Market Map: Top 50 Companies
No 3PL Controls More Than 6% of the Total
Page 14
The logistics industry is consolidating along three different pathways:
• The marketplace rewards leadership with exceptional valuations
- Expeditors and C.H. Robinson are the most highly valued publicly traded logistics
companies at 20.7x and 18.8x, respectively
- USCO and CTI were among the highest priced logistics acquisitions garnering
multiples of 9.7x, and 14.0x, respectively
The Logistics Land Grab
Leadership is highly valued from both the perspective of the public markets as well as in
a transaction scenario. Those companies who have successfully established leadership,
through acquisition and organic growth, are highly valued and sought after.
Full Logistics Suite Service Specialization Industry Specialization
• Leaders have acquired
companies to offer an end-to-
end solution for its customers
- UTi Worldwide:Market
Industries, SLi, Standard
- Kuehne & Nagel: USCO,
ACR Logistics
- Deutsche Post: DHL, Exel,
Danzas, AEI
• Major consolidators have
established leadership
- CH Robinson Worldwide:
truck brokerage
- Expeditors International:
freight forwarding
• Logistics companies have
developed an industry
expertise
- Kuehne & Nagel:
leadership in high tech and
telecom strengthened by
USCO acquisition
- Ceva (fka TNT): leadership
in automotive strengthened
by CTI purchase
Page 15
Convergence of Supply Chain Services:
Global Freight Forwarding and U.S.
Warehousing
Non-Asset-Based Surface
Transportation
Air/Ocean Freight
Forwarding
Asset-Based
Transportation
Transplace
Ryder Logistics
Hub Group
Schneider Logistics
UPS
Cat Logistics
RR Donnelley Logistics
Pacer
Penske
Menlo
NYK Logistics
Exel (Mark VII)
FedEx
Pittsburgh Logistics
Landstar
Transport Industries
$18.9 B
Deutsche Post
(Exel, T&B)
Ingram Micro Logistics
UPS
APL (GATX)
KN (USCO)
Americold
TPG (Ceva/CTI)
CAT Logistics
Logistics Insights
Genco
Ozburn-Hessey Logistics
Standard
Value-Added Warehouse
$12.7 B
UPS
(Menlo, Fritz)
DHL
(Danzas, AEI)
EGL (Circle)
BAX Global
Expeditors
GeoLogistics
UTI
Maersk Logistics
Phoenix International
Panalpina
KN
Kintetsu World Express USA
Hellmann Worldwide Logistics - USA
$9.4 B
Ryder
Dedicated
Penske
Logistics
Schneider
Dedicated
JB Hunt Dedicated
Averitt Express
Ruan Logistics
SIRVA Logistics
Swift Transportation
$7.9 B
0%
20%
40%
60%
80%
100%
20% 40% 60% 80% 100%
2
0
0
4
e
R
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v
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s
Note: Only includes the top-50 companies, or $49 billion.
Total U.S. logistics market is actually over $89 billion.
APL
Kuehne & Nagel
Deutsche Post
Exel
Ceva
International
Acquirors
Total = $48.8 Billion
U.S. Logistics Market Map: Top 50 Companies
PWC Logistics
Schenker (DB)
C. H. Robinson
UPS
UPS
(Menlo, Fritz)
Page 16
Single Sector Dominance is Rewarded
Leadership in a single service sector is highly rewarded. Expeditors and C.H.
Robinson are very highly valued – 20.8x and 19.7x EBITDA respectively
Prices as of 04/20/07
Equity Enterprise TEV/ LTM TEV / LTM TEV / LTM TEV / LTM Price to Earnings
Company Name Value Value Net Revenue EBITDA FCF EBIT LTM 2006E 2007E
Large Global Express / Logistics Firms
United Parcel Service Inc. 78,673 $ 79,963 $ 1.9x 9.5x 15.1x 12.1x 18.7x 17.4x 15.8x
Fedex Corp. 35,349 35,669 1.3x 7.3x 14.2x 10.9x 17.8x 16.0x 14.3x
Large Asset-Light 3PLs
Expeditors International 9,282 8,536 6.7x 20.8x 31.7x 22.8x 39.5x 32.9x 27.3x
C.H. Robinson Worldwide 9,253 8,707 8.0x 19.7x 21.8x 20.8x 34.7x 29.6x 25.4x
UTI Worldwide, Inc. 2,438 2,542 2.2x 12.0x 13.3x 14.4x 19.2x 24.9x 19.5x
Medium Asset-Light 3PLs
Hub Group Inc. 1,440 1,392 6.4x 16.7x 18.6x 18.0x 30.2x 25.9x 22.7x
EGL Inc. 1,931 1,891 1.9x 14.6x 23.2x 19.6x 34.3x 23.4x 20.1x
Landstar System Inc. 2,994 2,966 7.0x 14.6x 14.9x 15.9x 26.5x 24.0x 20.3x
Forward Air Corp. 1,057 954 4.6x 11.3x 13.9x 12.7x 21.6x 19.5x 17.5x
Aftermarket Technology Corp. 599 597 5.7x 9.3x 11.5x 17.9x 33.8x 18.2x 14.6x
Pacer International Inc. 1,062 1,109 2.5x 8.8x 9.1x 9.4x 15.6x 13.9x 12.4x
Small Asset-Light 3PLs
Stonepath Group 5 26 0.3x 54.3x NM NM NM NM NA
Target Logistics 49 47 0.9x 10.4x 11.8x 12.4x 26.7x 17.6x 12.1x
Overall
Low 0.3x 7.3x 9.1x 9.4x 15.6x 13.9x 12.1x
High 8.0x 54.3x 31.7x 22.8x 39.5x 32.9x 27.3x
Mean 3.8x 16.1x 16.6x 15.6x 26.5x 22.0x 18.5x
Median 2.5x 12.0x 14.5x 15.1x 26.6x 21.5x 18.5x
Note: FCF (free cash flow) is defined as EBITDA less capex
Page 17
Industry Specialization is Highly Valued
Leaders
USCO and CTI
succeeded by
building
vertical
solutions
Date Equity Trans Transaction Value / LTM: EV / LTM Target
Acquiror / Target Announced Value Value Revenue EBITDA EBIT Net Income Business
Geodis 11/16/2006 590 NA NA 12.0x NA NA FF
TNT Forwarding
UTI Worldwide 3/7/2006 197 NA NA 10.0x NA NA TM
Market Industries
Deutsche Bahn 11/16/2005 1,100 NA NA 10.0x NA NA 3PL, FF
BAX Global
Deutsche Post 9/19/2005 6,738 7,233 0.6x 10.6x 17.7x 16.7x Warehouse
Exel 3PL, FF
PWC Logistics 7/5/2005 NA 454 0.3x 14.1x NA NA 3PL
GeoLogistics
Welsh Carson 6/27/2005 180 370 NA NA NA NA Warehouse
OHL 3PL
Warburg Pincus 6/23/2005 NA NA NA NA NA NA Warehouse
New Breed 3PL
UPS 5/16/2005 1,250 1,350 0.8x 7.8x NA NA Regional
Overnite LTL
Yellow Roadway 2/27/2005 1,370 1,469 0.6x 7.7x NA 38.2x LTL
USF Corp TL Logistics
SUPERVALU 1/5/2005 165 234 0.7x 11.6x NA 25.0x 3PL
Total Logistics
UTI Worldwide 10/12/2004 75 75 2.7x 7.9x 10.4x 18.6x Contract
Unigistix Logistics
UPS 10/5/2004 150 260 0.1x NA NA NA Freight
Menlo Worldwide Forwarding
Exel Plc 6/16/2004 597 689 0.2x 6.7x 16.9x 31.6x Warehouse
Tibbett & Britten 3PL
TPG 6/11/2004 310 310 0.4x 10.3x 12.0x NA Freight
Wilson Logistics Forwarding
Reliant Equity 8/20/2003 NA NA NA 9.0x NA NA LTL Mgmt
Air Road Express
UTI Worldwide 10/11/2002 53 53 0.4x 6.9x 11.0x 12.8x Warehouse
Standard Corp.
Kuehne & Nagel 5/24/2001 361 394 1.4x 9.7x 13.2x 22.9x Warehouse
USCO Logistics
APL Logistics (NOL) 1/10/2001 454 513 0.8x 7.7x 13.3x 21.4x Freight Forwarding
GATX Logistics
TNT Post Group 9/4/2000 650 650 1.3x 14.0x 19.1x 31.9x Warehouse
CTI Logistics (CSX)
Mean 0.7x 9.6x 12.6x 25.2x
Median 0.4x 10.0x 11.5x 25.0x
High 2.7x 14.1x 16.9x 38.2x
Low 0.1x 6.7x 10.4x 12.8x
Page 18
Which of these three pathways is a relevant choice for you?
The Logistics Land Grab
Full Logistics Suite Service Specialization Industry Specialization
• Leaders have acquired
companies to offer an end-to-
end solution for its customers
- UTi Worldwide:Market
Industries, SLi, Standard
- Kuehne & Nagel: USCO,
ACR Logistics
- Deutsche Post: DHL, Exel,
Danzas, AEI
• Major consolidators have
established leadership
- CH Robinson Worldwide:
truck brokerage
- Expeditors International:
freight forwarding
• Logistics companies have
developed an industry
expertise
- Kuehne & Nagel:
leadership in high tech and
telecom strengthened by
USCO acquisition
- Ceva (fka TNT): leadership
in automotive strengthened
by CTI purchase
Page 19
Is it Possible to Change?
• Schneider Logistics
• PWC Logistics
• JacobsonWilpak
• UTi
Page 20
Entering the Logistics Market
Schneider Logistics Case Study:
Strategic Transformation
Results
• By linking the resources of the
nation's largest full truckload
provider with American Port
Services' transloading (August 2005)
and port dray operation, and
American Overseas Air Freight’s
(March 2006) freight forwarding and
customs brokerage services,
Schneider is the first national
truckload provider to offer port-to-
door import logistics service
• Terms not disclosed
Pre-acquisition
• Schneider National Inc., was a
leading provider of trucking and
transportation services
Acquisition
• Schneider had a logistics
subsidiary, but was looking to
expand drayage, transloading,
freight forwarding and customer
brokerage services to create a
one-stop solution in North
America
Page 21
Results
• PWC Logistics completed the
acquisition of Trans-Link (Asia freight
forwarding) in February 2005, Trans-
Oceanic Shipping (project forwarding) in
April 2005, and GeoLogistics (US-based
freight forwarding) in September 2005
• PWC Logistics tripled its market value
during this time period, as the market
recognized the wisdom of PWC’s
acquisition-led strategy
• Following a re-branding, Agility is now a
$5+B market capitalization global
logistics provider
Pre-acquisition
• PWC Logistics was a top
Mideast-based trucking and
warehousing firm, providing
supply chain solutions to the
U.S. Department of Defense
and a broad range of multi-
national companies
Acquisition
• The company was seeking to
expand into Asia through the
acquisition of specialty freight
forwarding, capture a larger
percentage of a key industry
segment (oil and gas), gain niche
project logistics services, and
expand into the United States
Entering the Logistics Market
PWC Logistics Case Study:
Strategic Transformation
Page 22
Savvy Buyer:
Convergence of Packaging with Warehousing
and Logistics – Jacobson Companies
• Jacobson Background
- A leading mid-size logistics company operating in North America
- Significant value-added warehousing company looking to transform into a global
logistics leader through a combination of natural growth and acquisitions
- Expanded into transportation management, contract logistics, and packaging
• Wilpak Background
- A leading Atlanta-based supply chain management company focused on contract
packaging, contract manufacturing, and logistics.
- Niche leadership in helping consumer products companies to bring their products to
new market
• Transaction Overview
- In May 2006, Jacobson acquired Wilpak
- Wilpak management team stayed on, taking an equity stake in Jacobson.
- After earn-outs, Wilpak received the highest EBITDA multiple ever for a mid-size
logistics company.
• Deal Rationale
- The ability to combine contract packaging and supply chain services into an
integrated solution to create value for customers.
- Transfer the Wilpak’s core skills and expertise in consumer products to other product
categories
- Improve utilization of existing warehouse facilities
The combination of warehousing and contract packaging proved to be dynamic, as the
company’s enterprise value doubled in the year following the acquisition of Wilpak
Page 23
Vertical Integration Success Story :
UTi’s Strategic Plan
NextLeap:
• In February 2002, UTi unveiled NextLeap, its five-year strategic plan to achieve
the company’s higher growth objectives
• NextLeap focused the company on five key growth platforms over the next 20
quarters:
1) Gaining major global strategic customers
2) Raising the annual net revenue growth rate
3) Improving operating margins
4) Rallying UTi’s employees on key performance metrics to achieve these
goals; and
5) Ensuring UTi’s team of people around the world deliver their targeted
performance over each of the next 20 quarters
UTi is a serial acquirer, having made over 20 successful acquisitions in the last
decade. As a result, UTi went from being a global freight forwarder to being a
global logistics firm with over $2.7 billion in annual revenue. The company has
used acquisitions to build out a core competency in contract logistics and provide
more services to customers. UTi achieved its success by following a long-term
strategic plan, known as NextLeap.
Page 24
NextLeap - Gaining major global strategic customers
• To gain major global strategic customers, UTi transformed itself into a global
integrated logistics provider by combining its acquisitions with its stand alone
service offering
Vertical Integration Success Story :
UTi’s Strategic Plan (continued)
Freight
Forwarding
Customs /
Compliance
Order Mgmt. Contract
Logistics
Road
Distribution
Specialized
Industry
Integrated
Supply Chain
Total
Outsourced
Range of Services and Solutions
Page 25
NextLeap - Gaining major global strategic customers
• Through its transformation, UTi was able to gain the following global customers:
Vertical Integration Success Story :
UTi’s Strategic Plan (continued)
Freight
Forwarding
Customs /
Compliance
Order Mgmt. Contract
Logistics
Road
Distribution
Specialized
Industry
Integrated
Supply Chain
Total
Outsourced
Range of Services and Solutions
Global
Local
Page 26
Vertical Integration Success Story :
UTi’s Strategic Plan (continued)
Through strategic acquisitions, UTi has transformed itself from solely a freight
forwarding company into a dynamic global logistics provider
Customs Brokerage
3%
Contract Logistics
15%
Other Logistics
Services
17%
Ocean Freight
Forwarding
26%
Air Freight
Forwarding
39%
Source: BB&T Capital Markets
Gross Revenue by Service Line
Page 27
Vertical Integration Success Story :
UTi’s Strategic Plan (continued)
UTi successfully implemented its strategic plan, as shown in revenue and
operating income growth over the five year period outlined by the company
$ in millions
Source: BB&T Capital Markets
Page 28
During the time UTi made the above acquisitions, its market capitalization increased from
approximately $450 million at the end of FY2001 to approximately $3 billion at the end of FY2006
Vertical Integration Success Story :
UTi’s Strategic Plan (continued)
As shown below, UTi had a successful acquisition track record while
implementing its NextLeap strategy
Source: BB&T Capital Markets
Company Acquired Acquisition Date Deal Size Company Description Status
Continental Group September-00 $17 Million
(+three-year earnout)
Strengthening of Asia Pacific
capabilities (mainly China)
Fully integrated
Grupo SLi Jan-02 $13 Million
(+five-year earnout)
Partial platform for European contract
logistics
Fully integrated
UTi Integrated Logistics (formerly $49 Million North American contract
Standard Corporation) Oct-02 (+two-year earnout) logistics platform Being integrated
Indair Carriers May-03 Undisclosed Largest airfreight exporter in
India
Fully integrated
International Healthcare Distributors June-04 $40 Million South African pharmaceutical contract
logistics model to be replicated in
emerging markets
Operating standalone
Unigistix October-04 $75 Million
(+two-year earnout)
Canadian 3PL contract logistics
provider
Operating standalone
Perfect Logistics June-05 $15 Million
(+four-year earnout)
Asia Pacific Platform for contract logistic Will be fully integrated
Concentrek September-05 $10 Million
(+four-year earnout)
North American Platform for
Transportation Managemen
Will be fully integrated
Market Transport March-06 $197 Million North American Platform for Truck
Brokerag
Will be fully integrated
Span International Group of Companies November-06 Undisclosed North American integrated and
customized supply chain management
solutions
Will be fully integrated
Page 29
Strategies for Winners
• The market rewards clarity
- Are you currently a niche leader?
- If so, what is your niche?
- If not, what will you do to create differentiated leadership?
• Who are your toughest competitors?
- 5 years ago?
- Today?
- 5 years from now?
• Are you prepared to make aggressive investments that clarify your
unique value proposition?
- Who are your target customers?
- What unique services to you provide?
- How much will you spend on IT?
- How much will you spend on national scale?
- Will it be enough relative to your competitors?
Amidst great market uncertainty,
2007 is a year for clear decisions
Page 30
Contact Information
Contact us:
Benjamin Gordon
Managing Director
BG Strategic Advisors
(561) 932-1601
[email protected]
www.BGstrategicadvisors.com
doc_462636449.pdf
The Logistics M&A Market Today
Copyright © 2007 by BG Strategic Advisors
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means —
electronic, mechanical, photocopying, recording or otherwise —without the permission of BG Strategic Advisors.
The Logi st i c s M& A Mar k et
Today: Pr of i l es of Leader s,
and St r at egi es f or Suc c ess
CSCMP 2007
Benjamin Gordon
Managing Director
BG Strategic Advisors
September 22, 2007
Page 2
Agenda
• Winner-Take All Marketplace
• Impact of Value-Added Services on Logistics Companies
• The Logistics Land Grab: Implications for Value-Added
Services
• Good-to-Great: Successful Transformations
• Strategies for Winners
Page 3
Winner-Take All Marketplace
Page 4
The Highest-Paid Player in Baseball, 1984
versus 2004: A Tale of Two Left-Fielders…
Page 5
…and Two Very Different Paychecks
Page 6
Representative Clients / Relationships
Page 7
Two Logistics Markets
The outsourced third-party logistics market in the United States is forecast as a
$120 billion industry and is growing at approximately 15% annually
$34
$45
$65
$77
$104
$120
$0
$20
$40
$60
$80
$100
$120
I
n
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t
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R
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(
$
B
)
1997 1999 2001 2003 2005 2007E
Page 8
Growing Divergence between Low Value
and High Value Logistics Companies
Page 9
Growing Divergence between Low Value
and High Value Logistics Companies
* Note: for public warehousing, only 10% anticipate a double-digit increase
Page 10
The Discount that Low-Value Companies Receive is Paralleled
in the Public Markets, where Trucking Companies Receive
Half the Valuation of Logistics Companies
LTM Median EBITDA Multiples
The median EBITDA multiple for a logistics company is much higher than that of
both truckload and LTL
Source: Publicly available market data
13.5
6.9
5.5
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Logistics Truckload LTL
E
B
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Page 11
26.8
22.7
17.4
12.2
14.1
12.0
18.9
15.5
18.3
0.0
6.0
12.0
18.0
24.0
30.0
36.0
LTM 2007E 2008E
P
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E
M
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l
e
Logistics Median
Truckload Median
LTL Median
…As Well as Price to Earnings Ratios
Median P/E Multiple Comparison
The median P/E multiple of a logistics company outpaces that of both truckload
and LTL
Note: The increase in the LTL median P/E multiple in 2007E is attributed to a decrease
in EPS for all of the firms considered in the LTL universe that year
Source: Publicly available market data
Page 12
26.4%
26.0%
23.9%
22.0%
16.5%
16.1%
14.0%
13.1%
11.3%
9.6%
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0.1%
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10.0%
15.0%
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30.0%
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Drivers Behind the Higher Valuations of
Logistics Companies
On average, logistics companies have a higher free cash flow return on average
total capital than truckload companies
Source: Bear Stearns Airfreight & Surface Transportation
Logistics
TL
2007E FCF Return on Avg. Total Capital Comparison
18.9% Logistics Average
10.7% TL Average
Page 13
Market Overview
Fragmented Logistics Industry:
Non-Asset-Based Surface
Transportation
Air/Ocean Freight
Forwarding
Asset-Based
Transportation
C. H. Robinson
Transplace
Ryder Logistics
Hub Group
Schneider Logistics
UPS
Cat Logistics
RR Donnelley Logistics
Pacer
Penske
Menlo
NYK Logistics
Exel (Mark VII)
FedEx
Pittsburgh Logistics
Landstar
Transport Industries
$18.9 B
Exel Americas (T&B)
Ingram Micro Logistics
UPS
APL (GATX)
KN (USCO)
Americold
TPG (TNT/CTI)
CAT Logistics
Logistics Insights
Genco
Ozburn-Hessey Logistics
Standard
Value-Added Warehouse
$12.7 B
UPS
(Menlo, Fritz)
DHL
(Danzas, AEI)
EGL (Circle)
BAX Global
Expeditors
GeoLogistics
UTI
Maersk Logistics
Phoenix International
Panalpina
KN
Kintetsu World Express USA
Hellmann Worldwide Logistics - USA
$9.4 B
Ryder
Dedicated
Penske
Logistics
Schneider
Dedicated
JB Hunt Dedicated
Averitt Express
Ruan Logistics
SIRVA Logistics
Swift Transportation
$7.9 B
0%
20%
40%
60%
80%
100%
20% 40% 60% 80% 100%
Total = $48.8 Billion
2
0
0
4
e
R
e
v
e
n
u
e
s
Note: Only includes the top-50 companies, or $49 billion.
Total U.S. logistics market is actually over $75 billion.
U.S. Logistics Market Map: Top 50 Companies
No 3PL Controls More Than 6% of the Total
Page 14
The logistics industry is consolidating along three different pathways:
• The marketplace rewards leadership with exceptional valuations
- Expeditors and C.H. Robinson are the most highly valued publicly traded logistics
companies at 20.7x and 18.8x, respectively
- USCO and CTI were among the highest priced logistics acquisitions garnering
multiples of 9.7x, and 14.0x, respectively
The Logistics Land Grab
Leadership is highly valued from both the perspective of the public markets as well as in
a transaction scenario. Those companies who have successfully established leadership,
through acquisition and organic growth, are highly valued and sought after.
Full Logistics Suite Service Specialization Industry Specialization
• Leaders have acquired
companies to offer an end-to-
end solution for its customers
- UTi Worldwide:Market
Industries, SLi, Standard
- Kuehne & Nagel: USCO,
ACR Logistics
- Deutsche Post: DHL, Exel,
Danzas, AEI
• Major consolidators have
established leadership
- CH Robinson Worldwide:
truck brokerage
- Expeditors International:
freight forwarding
• Logistics companies have
developed an industry
expertise
- Kuehne & Nagel:
leadership in high tech and
telecom strengthened by
USCO acquisition
- Ceva (fka TNT): leadership
in automotive strengthened
by CTI purchase
Page 15
Convergence of Supply Chain Services:
Global Freight Forwarding and U.S.
Warehousing
Non-Asset-Based Surface
Transportation
Air/Ocean Freight
Forwarding
Asset-Based
Transportation
Transplace
Ryder Logistics
Hub Group
Schneider Logistics
UPS
Cat Logistics
RR Donnelley Logistics
Pacer
Penske
Menlo
NYK Logistics
Exel (Mark VII)
FedEx
Pittsburgh Logistics
Landstar
Transport Industries
$18.9 B
Deutsche Post
(Exel, T&B)
Ingram Micro Logistics
UPS
APL (GATX)
KN (USCO)
Americold
TPG (Ceva/CTI)
CAT Logistics
Logistics Insights
Genco
Ozburn-Hessey Logistics
Standard
Value-Added Warehouse
$12.7 B
UPS
(Menlo, Fritz)
DHL
(Danzas, AEI)
EGL (Circle)
BAX Global
Expeditors
GeoLogistics
UTI
Maersk Logistics
Phoenix International
Panalpina
KN
Kintetsu World Express USA
Hellmann Worldwide Logistics - USA
$9.4 B
Ryder
Dedicated
Penske
Logistics
Schneider
Dedicated
JB Hunt Dedicated
Averitt Express
Ruan Logistics
SIRVA Logistics
Swift Transportation
$7.9 B
0%
20%
40%
60%
80%
100%
20% 40% 60% 80% 100%
2
0
0
4
e
R
e
v
e
n
u
e
s
Note: Only includes the top-50 companies, or $49 billion.
Total U.S. logistics market is actually over $89 billion.
APL
Kuehne & Nagel
Deutsche Post
Exel
Ceva
International
Acquirors
Total = $48.8 Billion
U.S. Logistics Market Map: Top 50 Companies
PWC Logistics
Schenker (DB)
C. H. Robinson
UPS
UPS
(Menlo, Fritz)
Page 16
Single Sector Dominance is Rewarded
Leadership in a single service sector is highly rewarded. Expeditors and C.H.
Robinson are very highly valued – 20.8x and 19.7x EBITDA respectively
Prices as of 04/20/07
Equity Enterprise TEV/ LTM TEV / LTM TEV / LTM TEV / LTM Price to Earnings
Company Name Value Value Net Revenue EBITDA FCF EBIT LTM 2006E 2007E
Large Global Express / Logistics Firms
United Parcel Service Inc. 78,673 $ 79,963 $ 1.9x 9.5x 15.1x 12.1x 18.7x 17.4x 15.8x
Fedex Corp. 35,349 35,669 1.3x 7.3x 14.2x 10.9x 17.8x 16.0x 14.3x
Large Asset-Light 3PLs
Expeditors International 9,282 8,536 6.7x 20.8x 31.7x 22.8x 39.5x 32.9x 27.3x
C.H. Robinson Worldwide 9,253 8,707 8.0x 19.7x 21.8x 20.8x 34.7x 29.6x 25.4x
UTI Worldwide, Inc. 2,438 2,542 2.2x 12.0x 13.3x 14.4x 19.2x 24.9x 19.5x
Medium Asset-Light 3PLs
Hub Group Inc. 1,440 1,392 6.4x 16.7x 18.6x 18.0x 30.2x 25.9x 22.7x
EGL Inc. 1,931 1,891 1.9x 14.6x 23.2x 19.6x 34.3x 23.4x 20.1x
Landstar System Inc. 2,994 2,966 7.0x 14.6x 14.9x 15.9x 26.5x 24.0x 20.3x
Forward Air Corp. 1,057 954 4.6x 11.3x 13.9x 12.7x 21.6x 19.5x 17.5x
Aftermarket Technology Corp. 599 597 5.7x 9.3x 11.5x 17.9x 33.8x 18.2x 14.6x
Pacer International Inc. 1,062 1,109 2.5x 8.8x 9.1x 9.4x 15.6x 13.9x 12.4x
Small Asset-Light 3PLs
Stonepath Group 5 26 0.3x 54.3x NM NM NM NM NA
Target Logistics 49 47 0.9x 10.4x 11.8x 12.4x 26.7x 17.6x 12.1x
Overall
Low 0.3x 7.3x 9.1x 9.4x 15.6x 13.9x 12.1x
High 8.0x 54.3x 31.7x 22.8x 39.5x 32.9x 27.3x
Mean 3.8x 16.1x 16.6x 15.6x 26.5x 22.0x 18.5x
Median 2.5x 12.0x 14.5x 15.1x 26.6x 21.5x 18.5x
Note: FCF (free cash flow) is defined as EBITDA less capex
Page 17
Industry Specialization is Highly Valued
Leaders
USCO and CTI
succeeded by
building
vertical
solutions
Date Equity Trans Transaction Value / LTM: EV / LTM Target
Acquiror / Target Announced Value Value Revenue EBITDA EBIT Net Income Business
Geodis 11/16/2006 590 NA NA 12.0x NA NA FF
TNT Forwarding
UTI Worldwide 3/7/2006 197 NA NA 10.0x NA NA TM
Market Industries
Deutsche Bahn 11/16/2005 1,100 NA NA 10.0x NA NA 3PL, FF
BAX Global
Deutsche Post 9/19/2005 6,738 7,233 0.6x 10.6x 17.7x 16.7x Warehouse
Exel 3PL, FF
PWC Logistics 7/5/2005 NA 454 0.3x 14.1x NA NA 3PL
GeoLogistics
Welsh Carson 6/27/2005 180 370 NA NA NA NA Warehouse
OHL 3PL
Warburg Pincus 6/23/2005 NA NA NA NA NA NA Warehouse
New Breed 3PL
UPS 5/16/2005 1,250 1,350 0.8x 7.8x NA NA Regional
Overnite LTL
Yellow Roadway 2/27/2005 1,370 1,469 0.6x 7.7x NA 38.2x LTL
USF Corp TL Logistics
SUPERVALU 1/5/2005 165 234 0.7x 11.6x NA 25.0x 3PL
Total Logistics
UTI Worldwide 10/12/2004 75 75 2.7x 7.9x 10.4x 18.6x Contract
Unigistix Logistics
UPS 10/5/2004 150 260 0.1x NA NA NA Freight
Menlo Worldwide Forwarding
Exel Plc 6/16/2004 597 689 0.2x 6.7x 16.9x 31.6x Warehouse
Tibbett & Britten 3PL
TPG 6/11/2004 310 310 0.4x 10.3x 12.0x NA Freight
Wilson Logistics Forwarding
Reliant Equity 8/20/2003 NA NA NA 9.0x NA NA LTL Mgmt
Air Road Express
UTI Worldwide 10/11/2002 53 53 0.4x 6.9x 11.0x 12.8x Warehouse
Standard Corp.
Kuehne & Nagel 5/24/2001 361 394 1.4x 9.7x 13.2x 22.9x Warehouse
USCO Logistics
APL Logistics (NOL) 1/10/2001 454 513 0.8x 7.7x 13.3x 21.4x Freight Forwarding
GATX Logistics
TNT Post Group 9/4/2000 650 650 1.3x 14.0x 19.1x 31.9x Warehouse
CTI Logistics (CSX)
Mean 0.7x 9.6x 12.6x 25.2x
Median 0.4x 10.0x 11.5x 25.0x
High 2.7x 14.1x 16.9x 38.2x
Low 0.1x 6.7x 10.4x 12.8x
Page 18
Which of these three pathways is a relevant choice for you?
The Logistics Land Grab
Full Logistics Suite Service Specialization Industry Specialization
• Leaders have acquired
companies to offer an end-to-
end solution for its customers
- UTi Worldwide:Market
Industries, SLi, Standard
- Kuehne & Nagel: USCO,
ACR Logistics
- Deutsche Post: DHL, Exel,
Danzas, AEI
• Major consolidators have
established leadership
- CH Robinson Worldwide:
truck brokerage
- Expeditors International:
freight forwarding
• Logistics companies have
developed an industry
expertise
- Kuehne & Nagel:
leadership in high tech and
telecom strengthened by
USCO acquisition
- Ceva (fka TNT): leadership
in automotive strengthened
by CTI purchase
Page 19
Is it Possible to Change?
• Schneider Logistics
• PWC Logistics
• JacobsonWilpak
• UTi
Page 20
Entering the Logistics Market
Schneider Logistics Case Study:
Strategic Transformation
Results
• By linking the resources of the
nation's largest full truckload
provider with American Port
Services' transloading (August 2005)
and port dray operation, and
American Overseas Air Freight’s
(March 2006) freight forwarding and
customs brokerage services,
Schneider is the first national
truckload provider to offer port-to-
door import logistics service
• Terms not disclosed
Pre-acquisition
• Schneider National Inc., was a
leading provider of trucking and
transportation services
Acquisition
• Schneider had a logistics
subsidiary, but was looking to
expand drayage, transloading,
freight forwarding and customer
brokerage services to create a
one-stop solution in North
America
Page 21
Results
• PWC Logistics completed the
acquisition of Trans-Link (Asia freight
forwarding) in February 2005, Trans-
Oceanic Shipping (project forwarding) in
April 2005, and GeoLogistics (US-based
freight forwarding) in September 2005
• PWC Logistics tripled its market value
during this time period, as the market
recognized the wisdom of PWC’s
acquisition-led strategy
• Following a re-branding, Agility is now a
$5+B market capitalization global
logistics provider
Pre-acquisition
• PWC Logistics was a top
Mideast-based trucking and
warehousing firm, providing
supply chain solutions to the
U.S. Department of Defense
and a broad range of multi-
national companies
Acquisition
• The company was seeking to
expand into Asia through the
acquisition of specialty freight
forwarding, capture a larger
percentage of a key industry
segment (oil and gas), gain niche
project logistics services, and
expand into the United States
Entering the Logistics Market
PWC Logistics Case Study:
Strategic Transformation
Page 22
Savvy Buyer:
Convergence of Packaging with Warehousing
and Logistics – Jacobson Companies
• Jacobson Background
- A leading mid-size logistics company operating in North America
- Significant value-added warehousing company looking to transform into a global
logistics leader through a combination of natural growth and acquisitions
- Expanded into transportation management, contract logistics, and packaging
• Wilpak Background
- A leading Atlanta-based supply chain management company focused on contract
packaging, contract manufacturing, and logistics.
- Niche leadership in helping consumer products companies to bring their products to
new market
• Transaction Overview
- In May 2006, Jacobson acquired Wilpak
- Wilpak management team stayed on, taking an equity stake in Jacobson.
- After earn-outs, Wilpak received the highest EBITDA multiple ever for a mid-size
logistics company.
• Deal Rationale
- The ability to combine contract packaging and supply chain services into an
integrated solution to create value for customers.
- Transfer the Wilpak’s core skills and expertise in consumer products to other product
categories
- Improve utilization of existing warehouse facilities
The combination of warehousing and contract packaging proved to be dynamic, as the
company’s enterprise value doubled in the year following the acquisition of Wilpak
Page 23
Vertical Integration Success Story :
UTi’s Strategic Plan
NextLeap:
• In February 2002, UTi unveiled NextLeap, its five-year strategic plan to achieve
the company’s higher growth objectives
• NextLeap focused the company on five key growth platforms over the next 20
quarters:
1) Gaining major global strategic customers
2) Raising the annual net revenue growth rate
3) Improving operating margins
4) Rallying UTi’s employees on key performance metrics to achieve these
goals; and
5) Ensuring UTi’s team of people around the world deliver their targeted
performance over each of the next 20 quarters
UTi is a serial acquirer, having made over 20 successful acquisitions in the last
decade. As a result, UTi went from being a global freight forwarder to being a
global logistics firm with over $2.7 billion in annual revenue. The company has
used acquisitions to build out a core competency in contract logistics and provide
more services to customers. UTi achieved its success by following a long-term
strategic plan, known as NextLeap.
Page 24
NextLeap - Gaining major global strategic customers
• To gain major global strategic customers, UTi transformed itself into a global
integrated logistics provider by combining its acquisitions with its stand alone
service offering
Vertical Integration Success Story :
UTi’s Strategic Plan (continued)
Freight
Forwarding
Customs /
Compliance
Order Mgmt. Contract
Logistics
Road
Distribution
Specialized
Industry
Integrated
Supply Chain
Total
Outsourced
Range of Services and Solutions
Page 25
NextLeap - Gaining major global strategic customers
• Through its transformation, UTi was able to gain the following global customers:
Vertical Integration Success Story :
UTi’s Strategic Plan (continued)
Freight
Forwarding
Customs /
Compliance
Order Mgmt. Contract
Logistics
Road
Distribution
Specialized
Industry
Integrated
Supply Chain
Total
Outsourced
Range of Services and Solutions
Global
Local
Page 26
Vertical Integration Success Story :
UTi’s Strategic Plan (continued)
Through strategic acquisitions, UTi has transformed itself from solely a freight
forwarding company into a dynamic global logistics provider
Customs Brokerage
3%
Contract Logistics
15%
Other Logistics
Services
17%
Ocean Freight
Forwarding
26%
Air Freight
Forwarding
39%
Source: BB&T Capital Markets
Gross Revenue by Service Line
Page 27
Vertical Integration Success Story :
UTi’s Strategic Plan (continued)
UTi successfully implemented its strategic plan, as shown in revenue and
operating income growth over the five year period outlined by the company
$ in millions
Source: BB&T Capital Markets
Page 28
During the time UTi made the above acquisitions, its market capitalization increased from
approximately $450 million at the end of FY2001 to approximately $3 billion at the end of FY2006
Vertical Integration Success Story :
UTi’s Strategic Plan (continued)
As shown below, UTi had a successful acquisition track record while
implementing its NextLeap strategy
Source: BB&T Capital Markets
Company Acquired Acquisition Date Deal Size Company Description Status
Continental Group September-00 $17 Million
(+three-year earnout)
Strengthening of Asia Pacific
capabilities (mainly China)
Fully integrated
Grupo SLi Jan-02 $13 Million
(+five-year earnout)
Partial platform for European contract
logistics
Fully integrated
UTi Integrated Logistics (formerly $49 Million North American contract
Standard Corporation) Oct-02 (+two-year earnout) logistics platform Being integrated
Indair Carriers May-03 Undisclosed Largest airfreight exporter in
India
Fully integrated
International Healthcare Distributors June-04 $40 Million South African pharmaceutical contract
logistics model to be replicated in
emerging markets
Operating standalone
Unigistix October-04 $75 Million
(+two-year earnout)
Canadian 3PL contract logistics
provider
Operating standalone
Perfect Logistics June-05 $15 Million
(+four-year earnout)
Asia Pacific Platform for contract logistic Will be fully integrated
Concentrek September-05 $10 Million
(+four-year earnout)
North American Platform for
Transportation Managemen
Will be fully integrated
Market Transport March-06 $197 Million North American Platform for Truck
Brokerag
Will be fully integrated
Span International Group of Companies November-06 Undisclosed North American integrated and
customized supply chain management
solutions
Will be fully integrated
Page 29
Strategies for Winners
• The market rewards clarity
- Are you currently a niche leader?
- If so, what is your niche?
- If not, what will you do to create differentiated leadership?
• Who are your toughest competitors?
- 5 years ago?
- Today?
- 5 years from now?
• Are you prepared to make aggressive investments that clarify your
unique value proposition?
- Who are your target customers?
- What unique services to you provide?
- How much will you spend on IT?
- How much will you spend on national scale?
- Will it be enough relative to your competitors?
Amidst great market uncertainty,
2007 is a year for clear decisions
Page 30
Contact Information
Contact us:
Benjamin Gordon
Managing Director
BG Strategic Advisors
(561) 932-1601
[email protected]
www.BGstrategicadvisors.com
doc_462636449.pdf