Specialized niche port logistics companies in the U.S. are drawing increasing interest from investment groups, including large global freight forwarders and private equity firms.
Small companies around ports on the East, West and Gulf coasts that provide such services as transloading, deconsolidating containers, and other value-added services including managing transportation by truck and rail are becoming targets for acquisition by larger companies.
“It’s a very specialized skill set and not every company has the expertise to navigate in and around the ports,” said Jason Bass, Managing Director and Co-Head of the Transportation & Logistics Group at Harris Williams & Co., a Richmond, Va.-based investment bank. “To be able to control a beachhead at the ports is very important to service providers who have customers who need to get their products to inland destinations.”
He said the sector is starting to attract interest from private equity firms that want to put their capital to work in companies that have a lock on certain specialized port niches. The sector is also drawing interest from larger global players “who may want to further control that freight once it hits the shore here in the U.S.”
The port logistics sector remains very fragmented, consisting of numerous companies that only operate in one or two ports, but lack the scale to offer services nationwide.
“I think we are on the cusp of the consolidation of port service providers,” Bass said. One of the reasons that smaller niche companies are seeking outside investment is that they have a hard time raising the capital to further expand in ports where real estate for warehouses and labor are very expensive.
“There’s not much opportunity for those companies to go public, like they have in the past,” Bass said. “So the next step for those companies that are growing and need to get greater access to capital or more technology and access to larger shippers is to either partner with a private equity group or with a strategic buyer.”
They are starting to find buyers willing to invest in them. “Over the past decade, any time a smaller player becomes a midtier service provider, it usually gets consolidated,” Bass said. Other large global logistics providers are just starting to round out their skill set by providing value-added services. “Schneider Logistics has both grown organically as customers have asked them to do more port logistics and made smaller acquisitions to fill out their supply chain capabilities,” he said.
Harris Williams, which provides advisory services to a broad range of 3PLs and transportation services companies in these sectors, expects there will be several transactions involving investment by private equity firms or larger 3PLs in niche port logistics companies in Southern California, the Northeast and the Gulf Coast over the next 12 months.
[Edited 10/25/2012: Updates throughout for clarity]