54 DC VELOCITY JANUARY 2016 www.dcvelocity.com
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antitrust concerns. By early October 2015, some of the
same concerns had been raised about the possible FedEx
acquisition. At that time, the commission set a deadline of
Dec. 7, 2015, for its decision in the case. (It should be noted
that the lower FedEx offer reflects the fact that TNT had
scaled back some of its operations between 2012 and 2015.)
XPO Logistics made another move in April 2015,
announcing that it was acquiring Norbert Dentressangle,
which had bought Jacobson just one year earlier. The
acquisition will give XPO a substantially larger footprint
in Europe.
UPS joined the acquisition movement in July 2015 with
an announcement that it was acquiring Coyote Logistics, a
non–asset-based truckload carrier that was also quite active
in the freight brokerage business.
The buying frenzy continued in August 2015 with Geodis
SA, a 3PL owned by the French national railroad, SNCF,
announcing that it was acquiring U.S.-based OHL from
a private equity company. Once again, a European-based
3PL was establishing a more prominent position in the U.S.
3PL marketplace.
XPO Logistics made its third large acquisition since early
2014 in September 2015, with its surprise announcement
that it had entered into an agreement to acquire Con-way
Inc. for an estimated $3 billion. The acquisition includes
Con-way Freight, Menlo Logistics, Con-way Truckload,
and Con-way Multimodal.
And in October 2015, the Danish logistics giant DSV,
which has grown through the acquisition of some 30 companies over the past 10 years, said it would buy U.S.-based
UTi for $1.35 billion. This move reflects the 3PL’s stated
desire to gain a larger presence in North America, South
America, and Asia.
WHY NOW?
Between early 2014 and September 2015 these companies
spent nearly $20 billion on acquisitions. Given that several of those acquisitions had occurred between the time
our 2014 surveys were completed and the time our 2015
surveys were to be conducted, we decided to ask the CEOs
participating in the 2015 surveys what, in their opinion,
had triggered that wave of acquisitions. Their responses
were quite interesting and tended to cluster in four categories: customer pressures in the marketplace, the desire
for geographical expansion, financial considerations, and
economic conditions.
Several CEOs indicated that their companies were feeling
market pressures from key customers to expand their range
of service offerings. As the scale of 3PL customer buys has
become larger and more geographically dispersed, many
customers have been forced to use multiple 3PLs to meet
their service requirements. Managing multiple relation-
ships with service providers is complicated and time-con-
suming, and many of those customers are not enthralled
with the 4PL (fourth-party logistics) model of doing busi-
ness, in which a primary or lead logistics service provider
oversees and coordinates the work of other 3PLs. Some
companies that have used 4PLs have reported that rather
than reducing the level of complexity of their relationships
with 3PLs, it has simply added another layer of complexity
and one more party to deal with.
As a result, 3PLs are under pressure to provide key customers with a broader range of services—to be a “one-stop
shop” that offers every service those customers may need.
Acquisitions provide the means to rapidly expand the service menu and respond to these pressures, particularly if
the acquired company has a history of providing high-quality services in the categories desired by customers.
Several other respondents focused on the need to broaden their companies’ geographical footprint. Mergers and
acquisitions have played a major role in that regard for
3PLs during the earlier stages of the industry’s evolution.
Their movements into Eastern Europe, the Asia-Pacific
region, and Latin America often began with alliances with
smaller players in those markets, which sometimes led to
the acquisition of those companies. Several of the CEOs
involved in the 2015 surveys said that they now see a need
to increase their scale in some foreign markets because
their customer base has expanded in those areas. Again,
that is much easier to accomplish through acquisitions than
through direct investment in markets that are often difficult to enter directly due to complexities associated with
existing regulations.
As global economic conditions have improved during
the past several years, the financial performance of many
3PLs has also improved. Several respondents noted that
some 3PLs have a lot of cash. Others observed that because
of low interest rates, the cost of money is low. Under those
circumstances acquisitions became far more attractive.
Another factor is that several of the recent 3PL mergers
and acquisitions have involved sales by private equity companies that had previously acquired 3PLs. That should not
be surprising, as this is exactly what private equity companies have done in many industries: acquire a company,
reorganize it, strengthen it financially, then sell it off when
the time is right. The time appears to be right.
Finally, most of the 3PL CEOs were convinced that
regional economic conditions were improving, and their
companies therefore needed to respond to the possibility
of significant market growth in the next several years by
expanding their scale, service portfolio, and geographic
coverage.
POST-ACQUISITION CHALLENGES
Not surprisingly, most of the CEOs involved in our 2015
surveys said they believe industry consolidation is likely to
continue in the near future. But, as has often been observed,
in this realm the easy part of the process is acquiring a company, and the difficult part is the post-acquisition integration of two companies.
