Top 25 Trans-Pacific NVOs
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Many smaller NVOs can ’ t afford to invest in the technology they need to stay competitive . Shutterstock . com
Mayur Bawa , an independent M & A consultant and former executive of DHL and SEKO Logistics , estimated forwarders derive about 80 % of their revenue from freight rates and 20 % from accessorials or ancillary services .
“ Profitability will be higher on accessorial changes than on freight . But you won ’ t have those without the linehaul .”
Around 70 % of their profitability comes from freight rates , since those ancillary services are more profitable .
“ Every company is different , but the profitability will be higher on accessorial changes than on freight ,” Bawa said . “ But you won ’ t have those without the linehaul . The heart of this business is still the linehaul .”
Bawa said midsize NVOs are “ always under pressure ,
www . joc . com no matter the market , from an M & A perspective .”
“ They ’ re either commodity- or relationship-driven ,” he said . “ And if it ’ s the latter , there ’ s a limited period of time post-closing that the seller will be with you , so you can lose those relationships .”
Additionally , midsize NVOs just generally carry risk , from a valuation standpoint , due to the typical makeup of their customer base .
“ It ’ s really difficult to value these companies right now ,” Bawa said . “ Bigger companies , you can price in churn . Most of the midsize companies have a top 10 client profile that covers 50 % and maybe even 75 % percent of their revenue , so there ’ s a big risk if you lose a key client .”
Olesen , meanwhile , said he also sees midsize players turning to each other to navigate the challenges .
“ I do think there will be consolidation in the midmarket , some by joining forces , but being relevant enough to get attention from carriers and where you get economies of scale and value prop to clients who don ’ t want to deal with the big guys ,” he said .
email : eric . johnson @ spglobal . com
July 29 , 2024 | Journal of Commerce 23