On a recent episode of WHAT THE TRUCK?!?, Drew Wilkerson, CEO of RXO, spoke with host Timothy Dooner about a wide range of topics, including RXO’s recent acquisition of Coyote Logistics, implementing Coyotes newly acquired technology and his thoughts on mergers and acquisitions in the coming year.
One of the big questions asked was what led to the decision to buy Coyote from UPS. For Wilkerson, purchasing Coyote was a strategic fit due to its similarities to RXO, including a focus on service, solutions to customers, use of technology and building relationships. “When you look at Coyote, they were a strategic fit because they looked at business very similarly,” he says.
Wilkerson adds that while the businesses complemented each other, they still did a lot of due diligence and identified that there wasn’t much in terms of customer and carrier overlap. A big positive was the strength of the Coyote management team, especially over the past six months.
Another compelling reason for the purchase was the opportunity to double the size of RXO’s freight brokerage at the bottom of the freight cycle. “When you look at our management team’s cost, we’re able to spread that out across more loads, you pull down your cost per transaction.” Wilkerson gave examples where on some lanes, Coyote or RXO may be the clear winner and able to buy significantly better due to its existing carrier relationships. That synergy of combining two systems to drastically lower purchased transportation costs was something Wilkerson highlighted when C.H. Robinson acquired American Backhaulers.
Wilkerson believes RXO’s acquisition will improve the ability for the newly combined companies to lower their overall purchased transportation cost. He added, “When we look back on this 12, 24 months from now, we’re going to procure transportation a lot better than what we’re doing today.”
Asked about the state of M&A, Wilkerson said he believes the industry is still in the early stages of consolidation. “There’s over 17,000 brokers out there across the country, but when you really take a step in and you look at it, now post our acquisition of Coyote, I think the top nine make up around 50%.” Wilkerson believes more consolidation is on the way, with industry players that have strong balance sheets, great relationships with customers and good technology in a position to do more M&A.
“M&A is always a tough deal; you have to have a seller that’s happy with the price they’re getting, you have to have a buyer that’s happy with the price that they’re paying. It’s gotta be something that is a good fit for the company.” Wilkerson adds that a lot of work goes into integrating two companies, especially two large companies, but he believes the industry is in a good position to see more M&A’s over the next 12 to 24 months.
Asked about his thoughts on additional RXO scaling post-acquisition, Wilkerson said the first goal is integrating the two entities in the newly combined RXO. That involves getting everyone on one platform. “When you look at our technology, you have RXO Connect. One of the first things that we wanted to do was do a deep dive on Bazooka, which was great technology that came out of the Coyote organization.”
Wilkerson plans on combining the newer RXO Connect freight optimization tech with some of the tools for carrier reps, waterfall routing guides and RFP tools tailored for large carriers that were more fleshed out on Coyote’s Bazooka platform.
While the technology integration is a priority, Wilkerson believes in order for that to occur there must be a focus on having the right people in the right place. He added that retention during the acquisition has been extremely high, which helps as RXO transitions with legacy Coyote’s customer base.
When combining the teams of RXO and Coyote over the past few weeks, Wilkerson said, “The comment that you hear from both sides is, ‘It’s like looking in the mirror.’ The organizations were run very similarly, but we were running after different verticals from a customer base standpoint.”
He adds the legacy RXO business was built on retail, e-commerce, industrial manufacturing and automotive, whereas legacy Coyote was largely built off food and beverage and transportation customers.
“For us, to be able to have something and be able to grow out into the different verticals, but have the right people in the right place, has been the most rewarding thing over the last several weeks,” said Wilkerson.
To learn more about RXO, visit rxo.com.