MODE Transportation acquires freight brokerage Avenger Logistics

Avenger’s Jason Roberts to lead MODE’s enterprise operations

MODE Transportation, a leading North American private third-party logistics provider based in Dallas, announced that it has acquired Avenger Logistics, a Chattanooga, Tennessee-based freight brokerage. 

Financial terms of the deal were not disclosed. Investment bankers at Capstone Headwaters brought Avenger to market.

“We are excited to have Avenger as a part of the MODE family, not only because it is an important component of our growth strategy, but also because of Avenger’s strong culture of providing a high level of customer service,” said Lance Malesh, MODE Transportation’s president and chief executive officer.

Avenger Logistics was founded in 2015 by Don Godsey and finished 2020 with approximately $80 million in gross revenue. MODE has its roots as an intermodal marketing company founded in 1989. It expanded its service offerings, was acquired by HUB Group in 2011 and then was spun off in 2018 to York Capital Management, a private equity firm. In November 2019, MODE and agent-based freight brokerage SunTeckTTS merged to form an entity with annual revenues exceeding $2 billion.

The deal is notable because while MODE has a largely agent-based freight brokerage network in which relatively decentralized offices — and MODE has more than 200 — pass a portion of their gross margin up to corporate, Avenger is a traditional, centralized, Chattanooga-style cradle-to-grave brokerage. 

Jason Roberts, president at Avenger Logistics, suggested in an interview with FreightWaves that Avenger’s in-house operation, geared toward aggressive volume and revenue growth during tight markets, could serve as an effective hedge for an agent-based model in which low operating costs insulate the business against freight market downturns.

“MODE does have an enterprise operations division similar to us,” Roberts explained, “and was able to bring the business in-house through agent acquisitions. MODE is growth-oriented and wants to offer diversification of service in the marketplace, and we provide that.”

Post-acquisition and integration, Roberts will continue to lead Avenger and also take the helm of MODE’s enterprise operations group. Roberts said that Avenger developed a hybrid cradle-to-grave/pod structure to scale large awarded accounts. In freight brokerage, pods are typically led by a customer account manager working closely with carrier representative teammates who cover his or her shipper’s freight. The pod structure allows revenue generators to specialize and focus on growing their accounts while still maintaining internal visibility to operations and accountability to shippers.

Roberts also emphasized Avenger’s expansion from a niche logistics outfit into a scalable dry freight business.

“While we’re known for our strength in overdimensional — high, wide and heavy — freight, which is a significant portion of our business, our van freight still represents over half of our business,” Roberts said. “We’ve been able to build deep relationships with customers, putting trailer pools in place with shippers and receivers at several major retailers.”

Malesh added, “Avenger’s strong track record of growth and unique product and service offerings were key reasons for the acquisition, but more importantly, the similar cultures allowed for a quick integration of the Avenger business model into the MODE platform.” 

In 2020, Avenger grew gross revenues by 7.5% year-over-year, which Roberts considered a success given Avenger’s exposure to major automotive shippers. For reference, C.H. Robinson grew North American Surface Transportation gross revenues by 0.3% year-over-year in 2020. 

The choppy business that transportation and logistics providers experienced in 2020 complicated due diligence processes and delayed M&A activity across the industry. Avenger founder Don Godsey, a serial entrepreneur, spun the business up with an exit strategy in mind and began preparing for a transaction in the fall of 2019. 

Roberts said that Avenger was two weeks away from closing with a buyer in March 2020; he was at a trade show in Las Vegas when the event was shut down early. COVID-19 had officially arrived. The deal was off and Avenger went remote for a number of months. When Capstone Headwaters went to work again in the third quarter of 2020, Avenger’s reporting was already complete and the bankers were able to fast-track the deal. It closed in the fourth quarter and was first announced internally at a companywide meeting earlier this month.

“MODE’s intermodal network is absolutely massive, their customer relationships are rock solid, and they’ve had them for years,” Roberts said. “There are some synergies that exist and value-add on either side. MODE doesn’t do a lot of flatbed — we know flat and open deck. There’s opportunity for a lot of organic growth.”

MODE inherited a proprietary transportation management system in the SunteckTTS merger; Avenger plans to integrate with that system sooner rather than later. As the plan stands now, Avenger will continue to operate under its own brand as a subsidiary business unit of MODE, similar to SunteckTTS.