Team Drive-Away bets trucks are good cargo

Dive Brief:

Team Drive-Away acquired IXT Logistics and Transportation Booking Services, both of the Kansas City region, earlier this month, a press release Wednesday stated. Team Drive-Away did not disclose terms of the acquisition.
Olathe, Kansas-based Team Drive-Away delivers trucks to new owners, auctioneers and other clients.
Team Drive-Away was acquired by Michigan-based auto hauler United Road Services in the fall of 2019.

Dive Insight:

Team Drive-Away's first acquisitions since becoming part of United Road Services are a sign of continued carrier consolidation in 2020, according to analyst Nikhil Sathe, the managing director for Armstrong and Associates' mergers and acquisitions practice.

Sathe said despite some economic volatility he expects in 2020, consolidation within truckload and niche markets, such as truck hauling, will continue. The goal will be to improve overall performance, Sathe told Transport Dive.

"Consolidation happens for two reasons: One is economy of scale and the second is the drive to improve operating ratio," Sathe said. A good transportation standard for operating ratio is 80%, Sathe said.

The market for the transportation of trucks is attractive to United Road Services and Team Drive-Away because even in a downturn, the tractors have to be moved around, from manufacturers to sales lots, or from initial owners to auction businesses, according to Sathe.

A truck hauler can attach as many as three other tractors to its delivery truck, per federal regulation. This piggyback method costs about the same as the price to haul one tractor, according to Team Drive-Away's website.

"It's a little bit recession-proof," said Sathe. "I think this particular market is a niche, and I don't think there is a problem in that niche."

Team Drive-Away said the acquisition will grow its service capacity in the market of Class 5-8 trucks. The acquisition also gets Team Drive-Away a larger roster of independent delivery professionals and logistics professionals, according to a statement by Steve Wambold, president of Team Drive-Away.

The asset-light company said it hauls about 20,000 Class 8 trucks a year. When United Road bought Team Drive-Away in October, company officials said they expected to transport up to 4 million vehicles in 2019.