Private equity investors are returning to trucking mergers and acquisitions as freight rates recover, but asset-based deals still carry the same structural traps that have historically produced poor returns, according to a FreightWaves report featuring Craig Decker, Managing Director at Brown Gibbons Lang & Company.
The freight market is showing signs of recovery, reigniting interest in M&A across the logistics sector, FreightWaves reported. Non-asset brokerage deals have historically attracted private equity, but asset-based trucking presents unique challenges. M&A interest began resurging in the third quarter of last year as truckload rate indexes shifted and regulatory changes began tightening capacity, Decker told FreightWaves.
The Three Compounding Failures
Decker said private equity's persistent losses in asset-based trucking come down to three compounding failures:
- Overleveraged balance sheets
- Misread freight cycles
- Underestimated operational complexity
He warned that old mistakes could repeat as the current M&A resurgence builds.
The Leverage Trap: Debt vs. Fleet Replacement
Strickland argued that the core financial error is leverage. Asset-intensive trucking businesses carry fleet replacement cycles of three to five years for truckload and seven years for LTL, meaning depreciation and amortization is a real cash expense, not a paper one, FreightWaves reported. When private equity firms load debt onto those businesses, debt service competes directly with capital expenditure.
"What they might do is extend the trade cycle on their equipment or defer some maintenance," Decker said. "When you start doing that, that just really, really deteriorates your business, whether it be from your assets not running at the right OR to your customer satisfaction rate going down."
A decade-plus of near-zero interest rates made the leverage math appear manageable. Decker noted that investment professionals who entered private equity after the 2008 financial crisis modeled businesses against LIBOR rates of around 50 basis points — effectively 1.5% to 2% all-in borrowing costs. Those same professionals are now senior decision-makers who have not been tested in a real rate environment, making the current high-cost-of-capital era a rude adjustment.
Misread Freight Cycles and Operational Complexity
Decker cited driver turnover as one variable that PE spreadsheets routinely underestimate — the industry average runs roughly 1.8 to 2 drivers per truck per year at approximately $10,000 per driver to test, seat, and train. Insurance incident rates, weather disruptions, and customer service failures cascade in ways that cannot be modeled, he said. Private equity firms that try to manage trucking companies by spreadsheet rather than through experienced operators tend to spiral downward.
Cycle timing is equally punishing. Decker said acquirers frequently rely on trailing-12-month financials without accounting for where a carrier sits in the freight cycle. Because of the operating leverage embedded in trucking, a 12-month snapshot at the wrong point in the cycle is, in his view, essentially irrelevant for underwriting a multi-year hold. He added: "It's not a good business within their holding period. Part of it is that their lifespan of their investment or their thesis on that is 3 to 5 years. It's really too short."
Cost structure at a glance
| Metric | Value per FreightWaves |
|---|---|
| Truckload fleet replacement cycle | 3–5 years |
| LTL fleet replacement cycle | 7 years |
| Driver turnover rate | 1.8–2 drivers per truck per year |
| Driver test/seat/train cost | ~$10,000 per driver |
| Typical private equity holding period | 3–5 years |
Where Private Equity Can Win
Decker said private equity can succeed in specialized or dedicated segments — cold chain serving pharma, hazmat, or other end markets with low price elasticity and sticky margins — rather than commoditized truckload. He pointed to growing investor interest in those niches.
Port Diversification Adds Another Layer
Port diversification is adding another layer of complexity for investors, with freight increasingly routing through Savannah, Gulf ports, and Norfolk rather than solely through Los Angeles-Long Beach, Decker told FreightWaves. "66% of our population is east of the Mississippi," Decker said, arguing that Mid-Atlantic and Southeast logistics hubs offer lower labor costs, fewer union constraints, and better highway access than California gateways.
Shippers and Operators Should Watch Service Quality
For freight forwarders, 3PL operators and shippers relying on PE-backed carriers, Decker's warnings carry a direct operational risk: when owners extend trade cycles or defer maintenance to service debt, equipment reliability and customer satisfaction deteriorate. That translates into delayed pickups, missed appointments and degraded service — exactly the outcomes shippers cannot afford in a tightening capacity environment. Understanding whether a carrier's ownership is financially engineering for a quick exit or investing in fleet health is now a due-diligence question for shippers, not just investors.
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