Dive Brief:

• Phoenix-based truckload carriers Knight Transportation and Swift Transportation announced a merger Monday, creating one of the top 5 trucking companies by revenue.
• The two companies will operate under Knight-Swift Transportation Holdings (KNX), although the brands will continue to operate independently. However, the Knight family will take over the reins of Swift's operations as Swift's current CEO and CFO step down.
• The combined companies will operate over 23,000 tractors, 76,000 trailers and employ more than 21,000 drivers to generate about $5 billion in annual revenue. Shares of Swift and Knight rose roughly 22% and 12% in pre-market trading, respectively.

Dive Insight:

The merger is reminiscent of XPO Logistics' acquisition of Con-way a few years back; in this case, family ties, opportune timing and hope for the end of a trucking recession appear to have played a much larger role.

Following its $3 billion acquisition of then-top-five carrier Con-way, XPO Logistics skyrocketed to become the third largest trucking provider (from 14th in 2015) and a symbol of industry consolidation. In that case, as now, a smaller company renowned for its management purchased a much larger one to position itself as a market leader. Knight Transportation, ranked 29th in Transport Topics' annual rankings, follows this trend as it effectively takes over management of the 6th largest company by revenue.

The two companies' services are complementary but still will continue to operate separately. The companies made it clear they would not consolidate networks, but rather share business intelligence, data and best practices to improve competitiveness. In their investor presentation, the companies also pointed to the rising role of e-commerce in trucking, requiring a more dense and sophisticated network structure.

In addition to the business reasons for the merger, timing and familial ties may have played a role in the decision. The Knight family worked for Swift Transportation prior to founding their own company in Phoenix, and former Swift CEO Jerry Moyes retired from his post last December.

In addition, there appears to be a renewed faith in the trucking industry, as indices suggest orders are finally recovering from a long recession. Aligned with this, Schneider National recently went public, a sign of market optimism. The birth of Knight-Swift Transportation is not just another consolidation, but also a symptom of improved conditions allowing for calculated risks.