9/28/2017

CLOSING THE DEAL Consolidation Trends in Transportation & Logistics

September 28, 2017

Chris Dalton Greg Lafin Jeff Ronsse Partner, National Practice Leader Managing Director Transaction Services BKD Corporate Finance Managing Partner [email protected] [email protected] [email protected]

Matt Klauser Gerry DeBiasi Director Partner, Kidd & Co. Transaction Services [email protected] [email protected]

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INTRODUCTION

• Thank you for joining! • Consolidation in transportation & logistics – interest & importance . Transportation industry is highly competitive & fragmented – consolidation is attractive . Correlation with consumer spending . Increase in value added or niche services – key differentiators . Technology-based services

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INTRODUCTION

• Numerous perspectives for today’s discussion . Corporate Finance . Transaction Services . Audit/Tax . Private Equity

TRANSPORTATION & LOGISTICS INDUSTRY UPDATE – HY 2017 OUTLOOK BKD Corporate Finance, LLC (BKDCF) has seen an increase in the activity of mergers & acquisitions (M&A) consolidation occurring in the trucking & transportation segment. This trend is expected to continue throughout the next five years, with market experts forecasting annual growth of 3 percent

Key External Drivers Include Keys to M&A Consolidation Key Highlights

• Industrial Production Index • Access to quality personnel • Lowest performing subsector stock in Q2 of 2017 was Reverse Logistics, up • Freight Transportation Services Index • Customer relationships 0.3% • Consumer spending • Optimum capacity utilization • On average, EV/LTM EBITDA multiples • Price of crude oil • Technology for the subsectors were up by 0.3x over the prior quarter & up 1.3x on a year • E-commerce sales • Governmental policies & regulation over year basis • Very competitive landscape

• Increased supply chain complexity

Source: Harris Williams, Lincoln International

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INDUSTRY AT A GLANCE: LOGISTICS • The 3PL market is forecast to grow at a significant rate owing to the increasing focus of manufacturers on their core businesses& subcontracting the activities, where they have less expertise • The growth in the e-commerce industry is expected to drive the 3PL market due to an increase in demand for fast delivery, efficient inventory management, freight forwarding & individualized shipping time • The players in the e-commerce sector are focused on selling goods online, thus necessitating the need for 3PL market providers

EV/EBITDA 12.8x 12.4x 12.8x 11.7x 12.0x 11.2x 12.0x 10.7x

10.0x 8.9x 8.8x 8.8x 8.0x

6.0x Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017

3PL Reverse Logistics

3PL MARKET TO SURPASS $1,100 BILLION BY 2024

Source: IBIS World, Lincoln International

TRENDS & OUTLOOK – LOGISTICS • Shippers are also anticipated to shift more of their transportation operations onto 3PL providers as they try to simplify their supply chain & focus their core business • Large multinational corporations & even small domestic retailers or manufactures are increasingly relying upon 3PL companies to provide transportation services that could simplify & manage supply chains that stretch over continents • Industry revenue is projected to climb at an annualized rate of 3.6% to $198.6 billion over the five years to 2021

Products & Services Segmentation

5.90%

22.40% Total $166.5Bn

71.70%

Transportation Management Warehousing and Related Services Other Services Source: S&P Capital IQ, Lincoln International

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INDUSTRY AT A GLANCE: TRUCKING

• Expected annual growth to be 2.2%+ over the next five years • Upticks in consumer confidence & spending will boost demand for goods transportation • The industrial production index is expected to increase in 2017 & 2018 • Further increases in per capita disposable income & consumer confidence are expected to cause consumer spending to rise

EV/EBITDA 12.0x 10.9x 11.0x 10.5x 9.8x 10.0x 9.1x 9.4x 9.0x 8.2x 8.0x 7.4x 7.4x 6.9x 6.9x 6.5x 6.5x 6.6x 7.0x 6.1x 6.1x 6.0x 5.0x 4.0x 3.0x Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017

Freight Forwarding/Intermodal Truckload Carriers Contracted Transportation

Improving economic conditions & a rise in diesel prices will benefit the industry

Source: IBIS World, Lincoln International

TRENDS & OUTLOOK – TRUCKING

• Industry consolidation will allow larger companies to leverage their size, resources & expand their geographic reach • The industry’s largest players have been able to attract more business, enabling them to outperform smaller companies, which account for the vast majority of industry market share • Growing trade volumes will support steady industry revenue growth • Due to fragmentation, operators experience intense price competition & generally earn low profit margins

Products & Services Segmentation

24.50% 38.10% Total $222.4Bn

37.40%

Other Transposrations Services Truckload Carriers Less-Than Truckload Carriers Source: IBIS World

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GF DATA – PRIVATE EQUITY MULTIPLES

NAICS Code: 484 Truck Transportation (21) Enterprise Total Enterprise Revenues ($ in TTM Rev Enterprise Enterprise # of EBITDA Margin % Value Range Value ($ in millions) millions) Growth % Value/Revenue Value/EBITDA Transactions 10 - 25 16.9 30.6 7.0 16.4 0.6 4.5 2 25 - 50 33.1 43.5 17.6 17.5 0.9 5.3 2 50 - 100 58.8 54.2 8.8 21.8 1.1 5.3 1 100 - 250 177.5 216.5 15.8 12.6 0.8 6.8 1 Total 67.7 82.4 13.7 16.9 0.9 5.5 1.6

Total Enterprise Revenues ($ in TTM Rev Enterprise Enterprise # of Year EBITDA Margin % Value ($ in millions) millions) Growth % Value/Revenue Value/EBITDA Transactions 2005-2006 27.9 38.7 28.7 21.4 0.9 4.1 3 2007 97.7 132.3 9.8 11.6 0.8 6.5 4 2008 105.6 93.8 24.6 19.5 1.0 5.2 3 2009-2011 39.7 54.7 6.5 14.5 0.8 5.7 4 2012-2013 127.2 168.3 10.8 15.3 0.9 6.1 3 2014-2016 31.4 32.6 8.7 20.0 1.0 5.3 5 Total 67.7 82.4 13.7 16.9 0.9 5.5 22

Source: S&P Capital IQ, Lincoln International

GF DATA – PRIVATE EQUITY MULTIPLES

NAICS Code: 4885 Freight Transportation Arrangement (6) Enterprise Total Enterprise Revenues ($ in EBITDA Enterprise Enterprise # of TTM Rev Growth % Value Range Value ($ in millions) millions) Margin % Value/Revenue Value/EBITDA Transactions 10 - 250 73.3 131.0 15.5 18.4 1.2x 6.8x 6 Total 73.3 131.0 15.5 18.4 1.2x 6.8x 6

Total Enterprise Revenues ($ in EBITDA Enterprise Enterprise # of Year TTM Rev Growth % Value ($ in millions) millions) Margin % Value/Revenue Value/EBITDA Transactions 2003-2007 77.4 65.4 14.4 22.8 1.7x 6.6x 3 2009-2012 69.2 196.6 16.5 13.9 0.7x 7.0x 3 Total 73.3 131.0 15.5 18.4 1.2x 6.8x 6

Source: S&P Capital IQ, Lincoln International

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INDUSTRY ACQUISITIONS Industry Acquisitions ($ in Millions)

Net Transaction Multiple of Multiple of Date Acquiring Company Seller (Description) Revenue EBITDA Value Revenue EBITDA Sept-5-2017 Daseke R&R Trucking Sept-2-2017 Carlyle Group United Road Vehicle Transporter Aug-17-2017 Quick International Courier Unitrans 95 325 0.29 June-10-2017 Penske Truck Leasing Old Dominion Truck Leasing Apr-10-2017 Knight Transportation 2,971 4,008 480 0.74 8.35 Dec-27-2016 Daseke Hennessy Capital Acquisition 626 Oct-28-2016 Transforce CFI 558 530 115 1.05 4.85 Jul-30-2015 Inc. Buckler Transport 14 13 1.09 Jul-6-2017 Heartland Express Interstate Distributor 117 Mar-02-2015 CRST International, Inc. Pegasus Transportation, Inc. - - - Dec-07-2015 Leonard's Express, Inc. WCD Trucking - - - Oct-30-2015 XPO Logistics, Inc. Con-way Inc. 3,057 5,745 497 0.53 6.16 Aug-18-2015 Apax Partners LLP Quality Distribution Inc. 801 988 69 0.81 11.67 Aug-18-2015 , Inc. Coyote Logistics, LLC 1,800 2,100 - 0.86 Roadrunner Transportation Jul-28-2015 Systems, Inc. Stagecoach Cartage and Distribution, LP. 40 34 7 1.18 5.71 Jan-20-2015 Celadon Group Inc. Taylor Express, Inc. 43 38 - 1.13

Has been acquired by

Minneapolis, MN

BKD Corporate Finance acted as financial advisor to JBS Logistics in this transaction

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Trailer Rental Company

Has been acquired by

Private Investors

BKD Corporate Finance acted as financial advisor to the Trailer Rental Company in this transaction

PANEL DISCUSSION

Chris Dalton Partner, National Practice Greg Lafin Leader Managing Director Jeff Ronsse Transaction Services BKD Corporate Finance Managing Partner [email protected] [email protected] [email protected]

Matt Klauser Director Gerry DeBiasi Transaction Services Partner, Kidd & Co [email protected] [email protected]

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QUESTIONS?

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The information contained in these slides is presented by professionals for your information only & is not to be considered as legal advice. Applying specific information to your situation requires careful consideration of facts & circumstances. Consult your BKD advisor or legal counsel before acting on any matters covered.

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CPE CREDIT

• CPE credit may be awarded upon verification of participant attendance • For questions, concerns or comments regarding CPE credit, please email the BKD Learning & Development Department at [email protected]

THANK YOU! FOR MORE INFORMATION Chris Dalton // [email protected]

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