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Top 50 3PLs: Will mergers and acquisitions alter the third party logistics landscape?

A flurry of major service provider deals captured mainstream headlines in recent months, but the consequence of this activity has yet to be measured by domestic and international shippers. Meanwhile, the EU flounders, Asia remains strong, and emerging nations may represent the next great opportunity for the major 3PL players.
By Patrick Burnson, Executive Editor
June 01, 2012

EU blues
Given that most of the mega 3PLs are based in the European Union, economists are suggesting that Darwinian tendencies will prevail and the smaller companies will be acquired before the year is out.

“Hopefully, easing inflation, improving global growth, a relatively competitive Euro, and containment of Eurozone sovereign debt tensions will help the economic activity stabilize in the second half of 2012,” says Howard Archer, IHS Global Insight’s chief European economist. “But much will depend on events in Greece and their repercussions.”

IHS currently forecasts Eurozone GDP to contract by around 0.5 percent overall in 2012, and economists fear that renewed contraction is very much in the cards for the second quarter. In its most recent survey of purchasing managers, the evidence has been largely disappointing.

The Eurozone is still facing major headwinds, including increased fiscal tightening in many countries and markedly rising unemployment,” says Archer. “Elevated oil prices have kept inflation sticky, maintaining a significant squeeze on consumer’s purchasing power while also hurting companies’ margins. On top of this, relatively muted global growth is limiting export orders.”

It is worth noting, however, that despite global economic concerns, mergers and acquisitions within the transport and logistics industry remained strong, as the number of deals increased almost 5 percent through the third quarter of 2011 compared to same period in 2010.

According to Transport Intelligence (Ti), a London-based think tank, the current global total deal value in 3PL and contract logistics compared to 2010 is down by almost 40 percent.

“This suggests that smaller, more specialized logistics providers appear to have been targets of acquisitions throughout 2011,” says Ti analyst Cathy Roberson. “The majority of the acquisitions made were in Asia and other emerging markets; however, the European and the U.S. merger and acquisition market remained fairly strong.”

Leading academic experts say much the same thing about global 3PL resiliency. For John Langley, clinical professor of supply chain management at Penn State University, the fact that so many major players remain in the mix at all is testament to the strength of the sector.

“It’s clear that contract logistics is a global business that can’t be brought down by regional economic decline,” says Langely. The process of outsourcing product flow management, storage, and related information transfer services—usually under long-term contract—remains the objective of increasing efficiency and control no matter where it’s being done.”

About the Author

Patrick Burnson
Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).

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