In the US, about $1.31 trillion is spent on transportation and logistics (according to the Council of Supply Chain Management Professionals). Yet, about 30% of transportation capacity is unused because of inefficiencies.
Well, this is what Echo Global Logistics helps to solve. Moreover, this week the company filed for an IPO.
Echo has developed a platform that processes data on a network of more than 16,000 transportation providers. Through sophisticated optimization, the company can offer its clients cost savings that range from 5% to 15% (which is a big deal in the transportation industry).
So far, Echo has more than 4,600 clients. And the growth ramp has been stunning, increasing revenues from $7.3 million in 2005 to $95.5 million in 2007. Echo posted net income of $1.7 million last year.
With the IPO money, Echo will be in a strong position to strike M&A deals. Keep in mind that the logistics sector is highly fragmented. According to the Transportation Intermediaries Association, no third-party logistics provider controls more than 5% of the US market.
What's more, the growth of outsourced logistics services should continue to grow. About 17% of logistics expenditures, in the US, are outsourced (this is according to a study from Armstrong & Associates).
The lead underwriters on the Echo IPO include Lehman Brothers (NYSE: LEH) and Citi (NYSE: C). You can also locate the prospectus at the SEC website.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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