There have been a number of acquisitions involving 3PLs that offer managed transportation services (MTS) solutions over the last year. Cumulatively, these acquisitions involve companies that have over 40 percent of the total MTS market.
|APL Logistics||By Kintetsu World Express||$1.2 Billion||February 2015|
|C.H. Robinson||Of Freightquote.com||$365 Million||December 2014|
|Coyote Logistics||By UPS||$1.8 Billion||July 2015|
|Echo Global Logistics||Of Command Transportation||$420 Billion||April 2015|
|Genco||By FedEx||$1.4 Billion||January 2015|
|Geodis||Of OHL||Undisclosed||August 2015|
|K+N||Of ReTrans||Undisclosed||June 2015|
|Menlo Logistics, a Division of Con-way||By XPO Logistics||$3 Billion||September 2015|
|Penske Logistics||Of Transfreight||Undisclosed||May 2015|
|Toll Group||By Japan Post||$5.1 Billion||May 2015|
|XPO Logistics||Of Norbert Dentressangle||$3.53 Billion||April 2015|
In MTS arrangements, the shipper outsources the planning and execution of some portion of their transportation department to a 3PL.
Even if the new company does not intend to disband the MTS operation, there can still be problems for existing customers. Effective managed transportation requires a robust transportation management system (TMS). What happens if the two 3PLs had standardized on different TMS solutions? Supporting both platforms increases their IT costs. Do they attempt to standardize on one or the other solution? Which one? Existing customers will not be anxious to undergo a new TMS implementation.
In meetings with MTS providers on their short list, the shipper can say something like “Acquisitions are common in the 3PL industry and can be disastrous for customers. What can you tell us that will allay our fears in this subject?” If the MTS provider reviews their corporate history and shows they have been focused on organic growth and have had an ongoing commitment to the MTS business line, the shipper may be comforted.
But some due diligence conducted by the financial department can also be useful. Has this 3PL made multiple acquisitions? What kind of acquisitions have they been? If a 3PL has been buying small regional brokerages, there would not be a negative impact on the MTS operations and the acquisition might actually improve MTS operations by expanding their knowledge of regional carriers. On the other hand, if they have bought larger 3PLs who offer a variety of different types of services – warehousing, freight forwarding, etc. – that is a more dangerous sign.
Is the company run by a CEO that is a serial entrepreneur? Is the company run by a CEO that has a history of parachuting into struggling companies and selling them? Is the 3PL owned by an investment firm? Is the company undervalued with high debts? These would all be warning signs.
In conclusion, the likelihood that a 3PL will be acquired is something that needs to be examined carefully when selecting MTS providers. There is no guaranty the new company will value the managed transportation service line.