Last week SunteckTTS, the ninth-largest freight brokerage in the United States, announced its acquisition of HA Logistics, a brokerage based in San Ramon, California, with locations throughout the West Coast. Before the addition, SunteckTTS’s top line revenue was projected to grow to nearly $1.2B for 2018. Sunteck was acquired by the private equity group Comvest in 2013; in 2017 Comvest completed a merger between Sunteck and TTS, creating SunteckTTS. FreightWaves had a wide-ranging conversation with Dave Dallas, SunteckTTS’s Chief Marketing Officer and President of Brokerage about the HA Logistics deal, the current climate for 3PL mergers and acquisitions, and the national freight market.
Dallas said that the deal made sense because SunteckTTS could bring its assets, scale, technology, and support services to the table, while HA Logistics offered geographic expansion with its solid network of West Coast offices.
“HA logistics adds to our geographic coverage, especially in some parts of the West that aren’t necessarily easy to grow organically,” said Dallas.
A strong cultural similarity between SunteckTTS and HA Logistics made the two companies eager to start working together, Dallas said, and when asked to be specific about culture, he talked about what made agent-based brokerages unique.
“That culture is the best of both worlds: you get the backing, support, compliance, and technology of a billion dollar company, coupled with an entrepreneur, a small business owner, who is absolutely devoted to taking your call on Friday night, Christmas Day, before or after hours, and handholding your freight and making sure the commitment they made to you is met. Usually you only get one or the other, either a big corporate experience or a tiny brokerage with a small network,” Dallas explained.
As Dallas started sitting in on sales calls to shipper customers with Alan Huttmann, the President of HA Logistics, he said what stuck out were the warm, positive relationships HA had with its shippers—some of the accounts are more than ten years old.
“It’s rare that you hear that kind of cheerleading and trust from the customer,” Dallas said.
We also talked about the current state of M&A activity in the 3PL industry: lots of capital looking for a home, sellers commanding high valuations, and a still-fragmented industry with a long tail of small players.
“We believe that the M&A environment is not cooling down, certainly not at this time. We believe there’s going to be continued consolidation and that M&A will be very active for quite a while. There are so many benefits to being large, and acquisitive growth is not going to slow down for us,” Dallas said.
After Dallas made a few references to the “current favorable freight environment,” we asked him what exactly he meant by that. For example, we asked whether the widening spread between softening spot rates and high contract rates positively affected SunteckTTS margins. SunteckTTS has an interesting mix of contract and spot freight, Dallas said, because although Sunteck and TTS were designed on similar models, they addressed different markets. Now the combined company has both very large shipper accounts and “a tremendous amount” of small to midsize shippers. Especially for small shippers, a tight-capacity freight market almost guarantees that they will have to use brokerages to find trucks: in general, Dallas believes, as long as capacity is constrained, brokerages and 3PLs should be able to find robust organic growth.
“The economy is strong and there are a lot of products that have to be moved. Transportation needs are greater than we’ve seen in a long time,” Dallas said.
FreightWaves wanted to know what SunteckTTS expected in the fourth quarter and to what extent the brokerage was helping its shipper customers prepare to move surging volumes.
“We are seeing something I’ve never seen to this extent in my 20+ year career,” Dallas marveled, “and that is shippers who want collaborative relationships with their 3PLs, who say ‘I understand, I get it, I want to work hand in hand.’”
“This favorable market will continue in the fourth quarter and beyond—we know the demands are going to be great. We’ve done a lot of behind-the-scenes work to help support our shippers by being as prepared as we can. We’ve made a few strategic hires of additional talent within the company to help with that. We’ve also had our most successful recruiting year for drivers and owners of trucks, which has big implications for Q4,” Dallas said. In addition to its brokerage and logistics service offerings, SunteckTTS has more than 2,000 trucks.
Dallas said that SunteckTTS’s more than two hundred agent offices looked at Q4 as an opportunity to get their feet in the door with new customers by covering loads that other brokerages could not.
“[SunteckTTS agents] see Q4 as an opportunity to solve problems for shippers who didn’t reach out in the second or third quarter because their loads were being covered, but now they’re running into an issue. We tend to pick up customers in the fourth quarter,” Dallas said.