XPO Logistics remains in acquisition mode, brings OHL’s Turbo Logistics into the fold
XPO Logistics continues to execute on its growth through acquisition strategy.
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When Brad Jacobs, an entrepreneur and founder and owner of Jacobs Private Equity LLC, and a group of investors made a $150 million commitment into Express-1 Expedited Solutions, a non-asset-based third party logistics transportation provider, and subsequently re-named the company XPO Logistics, in mid-2011, his chief objectives in building a multi-billion dollar transportation brokerage business in the coming years were to grow organically, build a comprehensive IT structure, get the right management team in place, and grow through acquisition.
While XPO is off to a smooth start with Jacobs at the helm, it is really starting to deliver on the latter growth objective: acquisitions.
Late yesterday, XPO announced it has acquired the operating assets of Turbo Logistics Inc., the freight brokerage division of OHL (Ozburn-Hessey Logistics LLC). The purchase price, according to XPO, was $50 million and excludes any working capital adjustments with no assumption of debt.
This follows previously-announced acquisitions made by XPO, including Continental Freight Services, a non-asset based 3PL focused on truck brokerage services and based in Columbia, S.C. in May, and Canada-based non-asset 3PL Kelron Logistics in August.
Established in 1984, Turbo has more than 600 customers through four locations, including: Gainesville, Ga.; Reno, Nev.; Chicago, Ill.; and Dallas, Texas, according to XPO. It has 170 employees and revenue of roughly $124 million trailing 12 months of revenue as of September 30, 2012.
XPO said Turbo has a strong carrier network and relationships in the retail, manufacturing, food and beverage sectors, coupled with synergies on XPO’s Express-1 expedited division and on the truckload side, especially in the temperature-controlled freight market.
In an exclusive interview with LM, Jacobs said several XPO team members have long-standing relationships with both OHL and Turbo, with conversations regarding a potential acquisition commencing in the June-July timeframe.
“OHL is active in freight forwarding, contract logistics, freight management, and truck brokerage,” said Jacobs. “And their strategy was to become more focused on a fewer number of things, so it made sense for them to divest assets. We were impressed with what we saw and impressed with their people. It has been in business for 28 years, and it shows. They have people that get the business and have longstanding relationships with their customer base and carrier base. There are things we can learn from each other and we can transfer best practices, too, which help to define a company.”
In terms of the integration process, Jacobs that over the next 90 days XPO will follow its standard integration playbook. This begins with moving Turbo over to XPO’s IT platform and Turbo gaining access to XPO’s transportation capacity, effective today, though XPO’s Charlotte, N.C. operations center.
XPO is also in the process of reaching out to Turbo customers and carriers over the next couple of weeks.
“Culturally, they fit with us and they are very growth-oriented and they are very much looking forward to scaling up, which is the main thing we look for in an acquisition,” said Jacobs. “We are looking at things like the quality of the management in place, and where it is located in terms of training and hiring people. Gainesville, Ga. is about an hour out of Atlanta and near the University of Georgia and Clemson. That is about 70,000 students along with four other universities in the immediate area, including North Georgia College and Gainesville State. That is a lot of students to recruit from.”
What’s more, Jacobs said XPO’s hiring efforts are paying off as the company has hired 125 sales representatives in the last 90 days.
Turbo’s Reno branch is also a good recruitment spot, said Jacobs, with several recruits coming from the University of Nevada. And XPO’s plan for Turbo in Chicago is to merge it with the XPO cold-start (establishing new operations in new cities) in Chicago led by Abtin Hamidi, which Jacobs said is one of XPO’s fastest-growing cold-starts, and do the same thing in Dallas, too.
By merging the Chicago and Dallas operations, Jacobs said XPO is creating larger, combined platforms in which it can expand significantly by adding salespeople.
In terms of Turbo’s scale, Jacobs said it has about 10,000 carriers with whom it does business with, and more than half of them are not existing XPO carrier partners.
“We learned with the Continental and Kelron acquisitions there is usually some overlap there,” he said. “About 31 percent of Turbo’s business is temperature-controlled (reefer). We do some reefer, mostly in our Express-1 group, and Turbo has 16 percent of its business on the expedited side, and they have a different carrier base for that. We have an owner-operator model on the Express-1 side with 450 owner-operators whereas Turbo has drivers driving under their own authority, with some being dry van guys that have available trucks and sometimes they are expedited.”
With Turbo in the fold, XPO’s carrier base is in the neighborhood of 20,000 carriers, according to Jacobs. This, he said, has led to a sort of critical mass and lane density, which has resulted in XPO being more efficient and receptive to its customers when they want something picked up with XPO having an available truck in the queue.
Turbo has about 600 “main” customers, said Jacobs that account for the bulk of its business and tend to have larger customers in its existing customer base.
When asked how many carrier partners XPO now has since its trio of acquisitions was made, Jacobs and XPO Senior Vice President Strategic Planning Scott Malat said that prior to these deals XPO was in the “single-digit thousands” and is now at more than 20,000.
Stifel Nicolaus analyst John Larkin wrote in a research note that XPO appears to be en route to its stated $500 million run rate goal.
“With a large acquisition pipeline and an estimated $275 million in cash on the balance sheet after this acquisition, we would be surprised if XPO did not announce another acquisition before year-end,” wrote Larkin.
About the AuthorJeff Berman, Group News Editor Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman
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