BY ROBERT C. LIEB
3PLs
strategicinsight
Consolidation in the 3PL industry:
Why is it happening,
and what does it mean?
MERGERS AND ACQUISITIONS (M/As) HAVE PLAYED
a major role in building the current structure of the
global third-party logistics (3PL) industry. Over the past
three decades, 3PLs have used them for such purposes as
achieving scale, broadening service offerings, expanding
geographic coverage, obtaining assets and/or technology,
securing management talent, acquiring new customers,
increasing market share, supporting earnings growth, gaining knowledge in a targeted industry (health care, for example), and in some instances, reducing competition.
The M/As have not only been used strategically by individual 3PLs to strengthen their market positions, but also
were used by private equity companies to build large-scale
service providers. One example of such private equity
investments was Apollo Capital’s use of acquisitions to
build Ceva Logistics.
We began following the merger and acquisition activity
of large 3PLs in our annual surveys of 3PL chief executive
officers (CEOs) in 1994. Each year since, we have asked the
CEOs in all three of our annual regional surveys (North
America, Europe, and Asia) to comment on such issues
as the number of acquisitions made by their companies
during the preceding year, the nature of those acquisitions,
the impact of acquisitions, the significance of acquisitions
made by private equity companies, and company projec-
tions of revenue growth to be generated through acquisi-
tions in subsequent years. In other sections of the surveys,
we have asked them to identify the most important 3PL
Interestingly, even though the number of large-scale 3PL
mergers and acquisitions slowed dramatically in the after-
math of the global recession, in each subsequent annual
iteration of our surveys the CEOs still identified M/As as
a major industry dynamic, and they continued to expect a
related industry restructuring to begin the next year.
THE PENDULUM SWINGS
Despite the CEOs’ predictions, relatively few large-scale
acquisitions occurred in the industry between 2008 and
2014. We found that puzzling, and in our 2014 surveys, we
asked the CEOs why merger and acquisition activity continued to lag expectations.
Several themes emerged in their answers. First, the CEOs
generally saw companies they might have targeted for acquisition as being overpriced. Second, and more importantly,
as a group the CEOs remained collectively rather cautious
because of the post-acquisition integration problems they
and other 3PLs had previously experienced. Third, several
CEOs noted that their companies had already achieved the
desired scale through previous acquisitions and organic
growth, and that further acquisitions were deemed unnecessary unless they were either likely to produce an immediate market niche in an attractive area such as health care, or
to expand their company’s geographic footprint.
A wave of mergers and acquisitions is reshaping the third-party logistics market
worldwide. A longtime industry observer explains what’s going on.
This story first appeared in the Quarter 3/2015 edition of CSCMP’s Supply Chain Quarterly, a journal of thought
leadership for the supply chain management profession and a sister publication to AGiLE Business Media’s DC
VELOCITY. Readers can obtain a subscription by joining the Council of Supply Chain Management Professionals
(whose membership dues include the Quarterly’s subscription fee). Subscriptions are also available to nonmembers
for $34.95 (digital) or $89 a year (print). For more information, visit www.SupplyChainQuarterly.com.
