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The integration process itself can be very unsettling for customers and may lead them to reconsider their future use of the larger enterprise. Once again, it is extremely important for those driving the integration process to communicate to their company’s key customers the message that the existing provider/customer relationship is valued and that the combined enterprise is committed to continuing to provide high-quality services to those customers.

Integration timetable. A common post-acquisition problem in many industries is that top management often sets unrealistic timetables for the integration of the two enterprises. Top management typically is under pressure from board members, stockholders, and the financial community to produce early proof that the acquisition was justified. But, by establishing a schedule for integration that is too aggressive, those executives place unrealistic expectations on employees who are responsible for producing those results. This may lead to premature decisions that not only lessen the likelihood of achieving long-term success, but also create a pres-sure-filled environment in which employee morale spirals downward and key people leave the organization. A more realistic timetable that acknowledges the need to understand the strengths and weaknesses of both companies is far more likely to produce the long-term benefits envisioned by those who supported the acquisition.

IMPLICATIONS FOR THE INDUSTRY

What does this recent wave of acquisitions mean to the 3PL marketplace? For one thing, it may trigger more acquisitions that are defensive in nature. Thirteen of the 30 CEOs involved in our 2015 surveys believe that will be the case. At the same time, six of them said they believe their companies may be acquisition targets.

For another, from a structural perspec-
tive, the big are getting bigger, and they
often are moving into service sectors and/
or geographies in which the acquiring com-
panies may or may not have had previous
experience. Blending all aspects of these
larger organizations will be a major chal-
lenge, but if done carefully, service offer-
ings will become more robust, and internal
economics may reduce costs and improve
efficiencies.
It should be remembered,
though, that larger companies are
not as agile as smaller ones. In
economic downturns they usually
have more difficulty in rightsizing
their operations than do smaller
companies in this industry. That
is particularly true with respect to
companies that had been asset-light
prior to their acquisitions of asset-
based companies.
From a customer perspective, the
M/A trend will delight some and
worry others. A big question on
many minds is this: How big do you
have to be to retain the interest of
the larger, combined 3PLs? Our ear-
lier research clearly indicated that
large 3PLs are increasingly selec-
tive in terms of the customers and
industries they focus upon. Does the
size threshold increase as the scale of
the 3PL increases? If so, some niche
3PLs may actually gain business that
is no longer valued by these larger
logistics service providers.
The ongoing consolidation of the
industry also increases the likeli-
hood that large, often global, cus-
tomers will be able to reduce the
number of 3PLs they use. As a
result, their relationship manage-
ment activities might be simplified,
and their consolidated buys might
produce cost savings as well.

After several years of limited merger and acquisition activity, the third-party logistics industry is now involved in a wave of transactions that are fundamentally changing the structure of the industry. For 3PLs, their alliance partners, and their customers, my advice is, hang on—the ride isn’t over yet!