The freight recession that gripped the transportation and logistics (T&L) industry for the past 32 months is fading, and analysts in the mergers and acquisitions (M&A) sector are focusing on one word in 2025: Normalization.
According to the M&A experts at Tenney Group, the market appeared to loosen in late 2024. During a recent webinar hosted by the Truckload Carriers Association, attendees were cautioned that freight recovery is not complete. The process is ongoing and slower than many analysts anticipated.
The good news
Early 2025 trends are promising, and a positive trajectory is evident.
“I think (recovery) is still yet to be determined fully,” said Beau McGinnis, a senior associate at Tenney Group. “But from a freight perspective, a rate perspective and an M&A perspective, things are trending in the right direction.”
A lot of deals made headlines during 2024 the year; however, most of those M&As occurred in the second half of the year following a sluggish start, and much of the activity
focused on diversification.
“When a company’s trying to diversify their service offerings and get into a new sector … it helps to have clear evidence the company is differentiated,” said Spencer Tenney, CEO and President at Tenney Group.
The freight recession has had a major impact on the trucking industry over the past year, as have interest rates and record inflation. In addition, the residual effects of what analysts refer to as “traumatic activity” had a profound influence in the M&A sector during 2024.
However, that began to change in the second half of the year.
The profit/loss factor
One of the major barriers to finalizing deals earlier in 2024 was the profit and loss (P&L) margin. While P&L was on course for stabilization, it had to reach the point buyers and sellers aligned on valuation and structure.
“Sellers and buyers self-elected out of the M&A process until conditions began to normalize,” Tenney said.
The point is evident in data indicating M&A activity of $39 billion in the first half of 2024 as compared to nearly $52 billion in the second half, McGinnis noted. As profit and loss normalized, company earnings strengthened, leading to higher deal enterprise values and volume increase.
Elevated operating expenses also impacted 2024 trends. For instance, the cost of non-production staff positions increased over 2023. These and other expense categories made comfort among buyers and sellers rare.
“There’s a direct correlation to rising operational costs and new buyers getting into the game using acquisitions as a way to expand their growth playbook,” Tenney said, adding that a “new formula” is needed to create profits.
Companies that specialized or fit into a specific niche fared better than traditional OTR carriers when it came to M&A. These firms survived the volatility of the freight market and were better positioned for involvement in acquisitions. General OTR carriers were not excluded from the M&A process, but they didn’t fare as well as those offering specialization.
“There’s a difference between being specialized (just) to be specialized and being specialized to present value-added services for customers in the marketplace for other companies,” McGinnis said.
M&A outlook for 2025
So, what does all this mean for M&A activity in 2025? Once again, the industry is looking forward to “normalization.” Promising trends from 2024 are expected to carry over to the current year.
However, there’s still call for caution in the M&A sector this year.
First, analysts caution about the new presidential administration and the costs of change. Overoptimism is a concern.
“I think it’s positive knowing where we stand from a political standpoint,” Tenney said. “Most people think there will be a favorable political and regulatory environment. There will be specific losers, but most (carriers) will probably perform pretty well and be insulated.”
Another concern focuses on smaller carriers whose business is tied up in assets. Many of these companies hope to ride positive movements brought on by the new administration with hopes they will advance or enhance a future exit from the industry.
If too many of these types of operations double down on expectations, there will be losers. For those seeking acquisitions, losers will be converted to a positive return.
Expect a volume spike
Analysts expect 2025 market conditions to drive a volume spike. McGinnis says he doesn’t believe conditions have to get considerably better on the freight market because everything else is leveling out.
“We don’t need perfect conditions; we just need stable conditions. That’s what we have right now,” he said. “We can move forward with the understanding that we have, and buyers and sellers can align on deal activity.”
This “rush of inventory” will be accompanied by an anticipated increase in freight volume, something that will further encourage M&A activity.
With improved M&A conditions, financial buyers — those who are not in the T&L business — may enter the fray when they see opportunities to diversify. McGinnis notes that interest from private equity and other financial buyers has been substantial of late.
However, it’s important to note that 80% of interest in M&A comes from buyers purchasing strategically within the existing space. This statistic is a positive one for those considering an exit from the T&L sector.
Innovation and “deal fatigue” will also impact the sector in 2025. The progression of innovation in the industry is going to allow some firms to be more successful than others, and for those who want to exit, deal fatigue is often an issue.
When combining the costs of nuclear verdicts, cargo theft and fraud, smaller carriers are going to want to leave the industry and stand ready to be acquired following a three-year recession when selling out didn’t seem possible.
Finally, both McGinnis and Tenney agree that 2025 will bring some big winners on the M&A front.
“One thing I have taken away from the last year is that trends that started in 2024 will continue in 2025, particularly in terms of specific sub-verticals within the industry,” McGinnis said, referring to the specialized market. “We are poised to have a lot of activity.”
This story was published in the March/April 2025 edition of Truckload Authority magazine, the official publication of the Truckload Carriers Association (TCA).
Since retiring from a career as an outdoor recreation professional from the State of Arkansas, Kris Rutherford has worked as a freelance writer and, with his wife, owns and publishes a small Northeast Texas newspaper, The Roxton Progress. Kris has worked as a ghostwriter and editor and has authored seven books of his own. He became interested in the trucking industry as a child in the 1970s when his family traveled the interstates twice a year between their home in Maine and their native Texas. He has been a classic country music enthusiast since the age of nine when he developed a special interest in trucking songs.
