HOOFDDORP, NETHERLANDS—TNT N.V.'s recent announcement that it is putting its TNT Logistics division up for sale confirms the ongoing trend of consolidation among global third-party logistics companies (3PLs). This news highlights the pressure on 3PLs to broaden their international presence in order to match their multinational customers' global scope. Exactly what tangible benefits and advantages these deals offer shippers, though, is still open to debate.

News of the proposed sell-off comes on the heels of similar announcements involving international logistics service providers: Deutsche Post World Net's acquisition of Exel, Deutsche Bahn's recent purchase of BAX Global, A.P. Møller's acquisition of P&O Nedlloyd and P&O Logistics, and Kuwaiti port operator DP World's buyout of P&O's ocean shipping terminals. (For more information about these recent agreements, go to www.logisticsmgmt.com.)

The decision to sell off TNT Logistics, which boasts some 37,000 employees and $4 billion in annual revenues, was based upon TNT's push to focus on businesses with a much larger customer base—specifically its Mail Netherlands and European Mail Network units in preparation for the impending privatization of mail service in Europe, said David Kulik, group managing director and North America CEO for TNT Logistics.

"There are 16 million customers of our mail network in the Netherlands, 300,000 customers of TNT Express worldwide, and 1,000 Logistics customers comprising 1,400 contracts," Kulik told Logistics Management. "The average margins for contract logistics in Europe, North America, and Asia have been declining for the last decade. When you have declining margins it is difficult to earn your cost of capital, and that is why we believe TNT Logistics will be more successful in a different corporate environment."

Kulik labeled the current consolidation trend among global logistics companies as "inevitable" and said he expects it to continue for the foreseeable future. One reason is that the market became saturated after "an enormous number" of providers entered the business in the 1990s, he said.

Other observers agree with Kulik's assessment. "Consolidating industries don't stop consolidating, and I think you are going to see more deals across the other 3PL disciplines—because of the structure and capacity of the industry—into 2007 at least," said Michael A. Regan, CEO of TranzAct Technologies.

Richard Armstrong, president of consultants Armstrong and Associates Inc., concurs that more consolidation among logistics service providers is inevitable, but he believes it will continue for the next five to six years. "The big four [UPS, FedEx, DHL, and TNT] continue to consolidate and grow," he noted. FedEx might possibly attempt to buy or merge with TNT, Armstrong added, but he doesn't see that happening in the short term.

What Armstrong does expect will happen in the not-too-distant future is that medium-sized, U.S.-based players—companies like Ryder, Penske, C.H. Robinson, EGL Eagle Global Logistics, and Expeditors International—will also become involved in international consolidations. "All of them have made some kind of incipient steps globally, but their major operations are still in North America. … It would seem that if they are going to keep up, they are going to have to consolidate and especially do some heavy-duty acquiring outside of the United States."

Will international 3PL mergers be good for shippers? On the surface, Regan said, one can argue that these deals appear to create a more seamless network and that the market would be well served. At the same time, he warned, continuing consolidation could end up providing shippers with broader services but fewer competitive options.