Broker Echo Global Logistics in Expansion Mode, CEO Says After 11th Deal Since 2007

Freight brokerage firm Echo Global Logistics is involved in an expansion strategy through acquisition, the CEO of the Chicago-based company said in an interview.

Just a month after Echo Global absorbed its latest target — its 11th deal since 2007 — Douglas Waggoner said he is looking for more opportunities.

“We continuously talk to companies that might be interested in joining us,” Waggoner told Transport Topics. “We look for companies that have owners who want to stay involved in transportation and who want to benefit from our technology platform.”

Waggoner said that two to four deals a year would be a good pace for the firm.

On July 6, Echo acquired smaller Phoenix competitor, Advantage Transport. Echo did not disclose a purchase price but said Advantage posted revenue of $26 million in 2010. Waggoner said Advantage’s merit was that it expanded Echo’s geographic base with a fertile client landscape.

“There was virtually no overlap with Advantage when it came to our customer base, even though we do use some of the same carriers,” Waggoner said. Advantage “also has a unique group of customers that we don’t do business with. They have Fortune 500 companies that ship a lot of truckload.”

Waggoner also has been an executive with less-than-truckload carriers USF Corp. and Yellow Freight System — now parts of YRC Worldwide — and Daylight Transport.

Echo does business with large customers as well, but its niche has been small to midsize companies that do not have big transportation departments, Waggoner said.

“Our customers have come to realize that we can manage their transportation with our technology,” he said.

Waggoner said 48% of Echo’s business is less-than-truckload, and 43% is truckload. The balance is international, small package and intermodal. Among Echo’s main customers, manufacturing, distribution or other industrial categories dominate, Waggoner said.

Echo went public in October 2009 and has reported net income increases since then. In the second quarter, Echo posted net income of $2.9 million, or 13 cents a share, on revenue of $151.5 million.

Echo delivered 350,662 shipments in the 2011 quarter, up 33% from the 263,565 in the 2010 period.

“If you’re a small-to-midsize company, your transportation is becoming more technology-enabled,” Waggoner said, “and that takes investment, and few shippers have capital lying around they can use for technology investment. So, they look for a partner.”

“Brokerage is a large and fragmented industry, and Echo has an opportunity to participate in the consolidation by buying smaller companies in the $5 million to $20 million revenue range,” said Barrington Research analyst Kevin Steinke.

“Echo can use acquisitions to add sales talent and expand its geographic coverage,” Steinke said. “Going forward, we expect Echo’s growth to be mostly organic, but we believe the company can continue to supplement growth with selective acquisitions.”