Indianapolis-based 3PL Fitzmark is acquiring Chattanooga, Tennessee-based Logistics Made Simple (LMS), FitzMark announced April 1.
LMS is a flatbed-oriented 3PL. In an email to FreightWaves, Taylor Williams, a spokeswoman for Fitzmark, said the “majority of LMS business is open deck, while the majority of FitzMark’s is dry van/reefer, which means very little customer crossover. Combining the two capabilities will provide a lot of opportunity for future growth.”
Although deals and other commerce have mostly gone to the sidelines during the national response to the coronavirus pandemic, Williams said the negotiations between Fitzmark and LMS began in November. The deal closed in mid-March, she said.
LMS has 50 brokers. They will all remain with the company, Williams said. The acquired company has about 25 employees each in both Chattanooga and Birmingham, Alabama, and both offices will remain open. They will add to the current count of 80 brokers at Fitzmark.
This is the second big acquisition for Fitzmark in a little more than a year. In January 2019, the company acquired Reliable Source Logistics, which focused on the reefer and beverage market.
An acquisition like this always raíses the question: Buy or build? Does a company decide to buy an existing company to get into a field or to grow in the acquirer’s existing focus of activity?
“Our approach is a combination of both buying and building growth,” Williams wrote in her email to FreightWaves. “We’ve grown organically each year with current customers in addition to the new clients we’ve brought on. We’ve also grown through acquisitions with companies that provide unique synergies and similar core values. By not heavily relying on just buying or just building, we’ve maintained a steady growth year after year.”
The price of the acquisition was not disclosed. LMS had sales of more than $50 million last year. LMS will be integrated into Fitzmark and will operate under that name.
“We’re beyond excited to become a part of FitzMark,” LMS President JD Davis said in a prepared statement released by Fitzmark. “The fit couldn’t be a better one from a core value, culture, and portfolio standpoint.”
The sale is taking place against an outlook for the brokerage business that is mixed at best. Besides reports of cutbacks and layoffs, an index published by the transportation research team at KeyBank shows the squeeze. Its just-released quarterly brokerage tracker for the first quarter estimated average dry van spot rates of $1.48 per mile, contract rates of $1.80 per mile and what it calls an estimated “sell rate” of $1.64 per mile, for a spread to the broker of 16 cents.
That is down 1 cent from the fourth quarter of 2019. But according to Key, the spread usually strengthens 4 cents in the first quarter.
Key revised its forecasts down for the rest of the year, based on “anecdotal commentary highlighting competitive pressures earlier in the quarter and the potential for nascent industrial and manufacturing slowdowns late in the quarter. That 16-cent spread is expected by Key to drop to 12 cents in the second quarter, before climbing to 14 cents in the third quarter and 16 cents in the fourth.