The Activist’s Call to Sell Forward Air

The recent call from Ancora to sell Forward Air is based on a deep analysis of the company’s performance and decisions over the past few years. Ancora, primarily a family wealth investment advisory firm with a history of activist efforts, has been involved with Forward Air for nearly four years. The firm initially focused on capital allocation, cost cutting, and margin improvements, which led to a significant increase in the stock price by late 2021. However, the stock began to decline again in late 2023 following the announcement of the acquisition of Omni Logistics. Ancora strongly opposed the deal, viewing it as detrimental to shareholder interests. Despite their objections, the deal was closed, and Ancora sold down its position in early 2024 as the stock price plummeted. The current call to sell the company stems from concerns about the management team’s ability to execute on the deal-related synergies, cut costs, and grow profitably.

Forward Air is an asset-light provider of transportation services, focusing on expedited less-than truckload markets. While the company offers time-definite delivery solutions at lower costs than traditional air freight, most of its profits come from its core Expedited LTL business. The acquisition of Omni Logistics, at 18-times trailing EBITDA, raised concerns about the company’s strategy and decision-making. The deal led to an over-levered balance sheet and bloated administrative expenses, impacting the stock price significantly. Ancora believes that the best course of action for Forward Air is to sell off non-core assets, restructure operations, and potentially seek a buyer who can streamline operations and drive long-term value creation.

The activist’s message is clear: Hire advisors and sell the company. Ancora recognizes that value creation as a public company would require flawless execution in terms of cost-cutting, balance sheet management, and profitable growth. However, the firm doubts the current management team’s ability to achieve these goals, especially following the questionable decisions surrounding the Omni Logistics acquisition. Private equity firm Clearlake Capital has also expressed interest in engaging with the board about strategic alternatives. This indicates the possibility of a potential acquisition offer, although it remains uncertain at this point. Other major shareholders, such as Irenic Capital and Ridgemont Equity, are also pushing for a strategic review and potential sale of Forward Air.

One of the main challenges facing Forward Air is its significant debt load of approximately $1.6 billion. The interest payments associated with this debt are already impacting the company’s cash flow, potentially deterring private equity investors. However, the activist’s call to sell the company presents an opportunity for restructuring, cost-cutting, and refocusing on core operations. Private equity funds excel at these types of transformations, making a potential acquisition by Clearlake Capital or other firms a plausible outcome. The involvement of major shareholders and the activist pressure from Ancora suggest that significant changes may be on the horizon for Forward Air.

The activist’s call to sell Forward Air reflects a deep analysis of the company’s performance and decisions in recent years. The concerns surrounding the Omni Logistics acquisition, bloated expenses, and over-levered balance sheet have prompted Ancora and other major shareholders to push for a strategic review and potential sale of the company. While challenges lie ahead, including the large debt load and potential hurdles to a private equity acquisition, the opportunity for restructuring and value creation through a sale is significant. Forward Air’s future may hinge on the ability of the management team and board to navigate these challenges and seize the opportunities presented by the activist’s call.