On Thursday, Uber Freight announced the acquisition of Transplace for $2.25 billion, a deal the companies say will “create one of the leading logistics technology platforms, with one of the largest and most comprehensive managed transportation and logistics networks in the world.”
We asked FreightWaves experts to provide us their Hot Freight Opinions (HFOs) on the deal:
Craig Fuller, founder and CEO
This is a monster deal in the FreightTech space and makes strategic sense for Uber Freight (NYSE: UBER). Uber Freight will now have direct access to more freight than almost any other domestic surface freight provider.
The ability for Uber Freight to take a large portion of the Transplace freight and put it into their marketplace means that carriers will have no choice but to check the Uber Freight app first when trying to find the right load. It is a massive game-changer and signals that the digital freight age is clearly upon us and there is no turning back.
George Abernathy, president
The acquisition of Transplace by Uber is special to me, since I spent a wonderful portion of my career at the great company that is Transplace. Congratulations to Frank McGuigan and his team.
Uber’s acquisition demonstrates just how innovative and creative the M&A market is today in the logistics and transportation space. The strengths of each company seem to complement each other — Uber’s digital capacity acquisition and Transplace’s managed transportation toolbox. Frank’s comments about expecting and wanting this to be industry-changing and transformational are words for both companies to listen and hear. Interesting to watch revenue growth (acquiring share) and EBITDA focus. Will be interesting to see how those goals align.
We watch XPO spin GXO out, while Uber acquires Transplace. This is a great time to be in logistics and transportation.
Note: George Abernathy was formerly the president of Transplace.
Kevin Hill, executive publisher
The philosophy behind Greenbriar Equity’s $500 million investment in Uber Freight last October became much clearer with its acquisition of Transplace. Uber Freight’s growth strategy has transitioned from build to buy with this acquisition. Transplace offers the scale and diversity in offerings that Uber needs to accelerate the path to long-term profitability.
JP Hampstead, director, Passport Research
An investor/banker uninvolved in the deal told me this morning that capital markets sentiment for FreightTech companies “has never been more bullish.” We’re living in an age of creative, bold M&A (and restructuring!) where the most interesting deals are more like Knight-Swift’s foray into LTL, or XPO’s split, or Uber Freight combining with Transplace than the routine bolt-ons and tuck-ins we’ve become accustomed to during this last loose money cycle.
In this deal, Uber Freight gets a huge Freight Under Management sandbox to play in and apply technology to, and Transplace gets a global top-tier technology organization accustomed to building and shipping products with high-end, consumer-grade user experiences. Transplace also gets a whole new capacity strategy, and may have the kinds of flexible and on-demand carriers it needs to execute even more of its dynamic network optimizations on the fly.
I’m interested most to see what approach the combined entity takes to Europe, given Uber Freight’s Euro-exit and Transplace’s new office in the Netherlands, and of course we’re all waiting to see if Uber can truly tie together end-to-end supply chain services, from supplier orchestration and middle mile down to residential delivery.
Michael Baudendistel, market expert
Uber Freight has grown very quickly the past couple years, but in 2020 it was still only 9% of Uber’s total revenue while posting significantly negative EBITDA. Brokering freight loads is fundamentally different from arranging passenger rides, with far more service requirements and complexity associated with freight transportation.
So, before today’s announcement, it would have been reasonable to question Uber’s long-term commitment to freight. But, this deal is a game-changer. The acquisition of Transplace tremendously enhances Uber’s capabilities and credibility in freight and should give it the scale it needs to compete with the nation’s largest freight brokers.
John Kingston, editor at large
A couple of things about the deal jump out. First, that’s a multiple of more than 22 times EBITDA if we go by the Uber Freight revelation that Transplace has an EBITDA of more than $100 million. They weren’t more specific than that. If you round down to $100 million, it’s 22.5 times. That is rich and congratulations to the PE investors who are reaping a strong number out of this sale.
Second, what came up in the reporting is that this is full integration, a company with a big presence in the upstream — Transplace — being bought by one with a strong presence downstream, Uber Freight. Somebody noted that this is exactly the opposite of what XPO is doing with its spinoff. So you’ve got experienced management teams in the logistics sector looking at a structure and doing completely opposite things. Interesting divergence.
Zach Strickland, market analyst
This acquisition makes a lot of sense for both parties. Uber Freight has been struggling to gain ground in the 3PL space while Transplace is a well-established 4PL. Essentially, Uber is purchasing quality revenue and a solid business, while Transplace gets the Uber brand, which carries significant marketing value, and access to different technology.
That said, the bigger story is the ability for TPG to offload a high-value transportation company within a five-year ownership period considering the volatility in the space. This also may be an indication that many are calling a top for the market with all the M&A activity this year.