Check Call: What if it’s not the worst time to buy?

Welcome to Check Call, our corner of the internet for all things 3PL, freight broker and supply chain. Check Call the podcast comes out every Tuesday at 12:30 p.m. EST. Catch up on previous episodes here. If this was forwarded to you, sign up for Check Call the newsletter here.

Inside this edition: A merger or acquisition might be worth considering; big trends in the supply chain world this year; and a cannabis/3PL deal closes.

Let’s make a deal. 2022 was full of a lot of changes for everyone. Rates plummeted, drivers left the market entirely or signed on with a bigger company. Everything and everyone was changing. Mergers and acquisitions led to a hefty amount of those changes. At the beginning of the year M&A was strong and carriers and shippers were solving capacity problems by just buying a company that could solve those problems for them, such as American Eagle Outfitters and Quiet Logistics. As the Federal Reserve pushed up interest rates, M&A hit the brakes heading into the back half of 2022, leaving everyone wondering what comes next. There was still investment capital needing to be spent, but when the market turned, it had to be spent smarter.

2023 enters the chat. So far the year has been more of the same of the back half of 2022. Low volumes, low rates and overall not ideal conditions for making money that could offset spending millions of dollars on acquiring a new company. However, M&A during down markets could be a huge win; that’s when the deals are to be had. Come across someone that just wants to sell the business and be done — winner, winner, chicken dinner.

According to Bain & Co.’s 2023 M&A Report: “M&A in times of turbulence validates how M&A was part of the winning response in previous down cycles. We examined the acquisition activity of 2,845 companies from around the world during the global financial crisis and economic downturn of 2008-2009. We found that in the long run, companies that executed at least one deal per year during the economic downturn earned 120 basis points more in total shareholder returns than companies that were inactive in M&A.”

Sticking with the research theme: The supply chain had problems before the pandemic that were heightened and exacerbated as a result of the countless supply chain disruptions throughout the pandemic. Frost & Sullivan was tracking nine of what are referred to as mega trends (key technologies or changes in society that will impact economies moving forward).

Across these various mega trends there are five growth opportunities related to the supply chain. They are decision-making using AI and machine learning, robotics as a service, return logistics as a service, zero-waste manufacturing and autonomous private shuttles and pods. Looks like 2023 might make us one year closer to living like the Jetsons.

Market Check. Tender volumes dipped 11% out of Dallas last week as the city was frozen over by a significant ice event. Rejection rates jumped marginally and have shown no indication of significant risk to capacity. It appears shippers were able to get in front of this weather event by shipping ahead of the storm. This event was reminiscent of the 2021 February storm, but supply chain conditions are in much better shape this time around. Everyone should still watch for a rebound in activity this week as production resumes.

Who’s with whom? GreenTec Holdings, a wholly owned subsidiary of Avant Brands Inc., a leading producer of premium handcrafted cannabis products, has officially closed on the acquisition of 3PL Ventures Inc. The deal was a casual $15 million and this time, we have the breakdown. According to the news release, the deal goes a little something like this:

$1.5 million cash paid on closing.
$9.5 million payable by way of a convertible debenture with a conversion price of 50 cents per share in the capital of Avant shares, an annual interest rate of 10% and a maturity date of Aug. 1, 2024.
The issuance of 16,430,573 Avant escrow shares.
The issuance of 5,819,161 Avant non-escrow shares.
The issuance of 5 million common share purchase warrants to acquire Avant shares at an exercise price of 50 cents on or before Feb. 1, 2025.