Industry Consolidation: What to do if Your Third-Party Logistics Company is Acquired?

With several big mergers and acquisitions recently, the 3PL sector remains ripe for consolidation. Here is what to do if a 3PL you work with becomes part of a larger organization.

Nov 04, 2015

In August, French supply chain operator Geodis SA announced plans to buy U.S.-based logistics company OHL for an estimated $800 million. A few weeks later, XPO Logistics revealed that it will purchase truckload carrier Con-Way for $3 billion, XPO’s second big acquisition this year.

Those deals are the latest in a flurry of merger-and-acquisition activity among third-party logistics (3PL) companies over the past few months. The 3PL sector is ripe for consolidation, and more high-profile deals could be coming.

Industry watchers expect to see more acquisitions similar to recent purchases of 3PLs by global giants like UPS and FedEx Corp. Interest rates remain relatively low, making it economical to build market share through acquisitions. Larger transportation companies are particularly interested in 3PLs that serve mid-sized shippers. For example, C.H. Robinson’s 2014 acquisition last year of Kansas City-based brokerage FreightQuote has helped the Chicago logistics company expand truckload and LTL services to many more mid-market customers.

Industry consolidation creates uncertainly, especially if your company works with a 3PL that has just been acquired or merged with another transportation provider. Everything, from the technology and processes the 3PL uses to the people you deal with on a daily basis, may be open to question.

After an acquisition, you want to make sure that your company’s shipping needs are going to continue to be met. Here are some key issues to focus on as you and your 3PL adjust to life after a buyout:

Industry Consolidation

Merger-and-acquisition activity has heated up among 3PLs and transportation companies in the past year. Here are some of the industry’s top deals:

  • December 2014: C.H. Robinson buys Freightquote for $365 million.
  • April 2015: FedEx Corp. buys Dutch parcel company TNT Express for $4.8 billion.
  • April 2015: XPO Logistics buys French-based Norbert Dentressangle SA for $3.5 billion.
  • June 2015: Switzerland-based Kuehne + Nagel buys ReTrans Inc. for an undisclosed price.
  • July 2015: UPS buys Coyote Logistics for $1.8 billion.
  • August 2015: France-based Geodis acquires OHL for an undisclosed price.
  • September 2015: XPO purchases truckload carrier Con-Way for $3 billion.

Source: American Trucking Associations

Niche Expertise

It is likely you chose to work with your current 3PL because it has a certain industry-specific knowledge that is valuable to your company and supply chain. Your 3PL offers areas of specialization, whether they are particular regions, modes, businesses or technologies, that enable a deeper knowledge than other logistics firms can provide.

If a 3PL you work with is acquired, you want to make sure that institutional knowledge will not be lost. In a perfect world, an acquisition might even combine the niche expertise in specific verticals with a large carrier network, leading to an even more successful transportation partnership.

Customized Services

These days, shippers expect 3PLs to make their supply chains more economical and efficient. Unlike some larger logistics companies, a mid-sized 3PL will not try to cram your company’s unique transportation needs into a one-size-fits-all solution. More than likely, you have a dedicated account representative who took the time to learn and understand your shipping and supply chain, and developed a customized solution.

Because logistics is essentially a service business, having the right expertise and attention to detail can lead to quicker efficiencies and savings in your company’s movement of freight. If your 3PL is bought out, you need to seek assurance that the new organization will continue to work closely with your company on addressing its transportation needs.

Flexibility and Accessibility

One of the biggest customer fears during an acquisition is that you will now have to navigate your way through a large bureaucracy to resolve issues that arise with your shipping. The quality of customer service will decline, processes will change, and your company will be shifted to a new account team.

That does not have to happen after an acquisition. In some cases, the acquired company is allowed to continue serving its customers as it sees fit. As a shipping customer, it is to your benefit to make sure your company will continue to receive good service and work with a 3PL that is flexible and action-oriented when issues arise. This kind of accessibility is invaluable in the fast-moving, increasingly complex web of logistics and global supply chains. Large 3PLs may offer deeper pockets and more resources, but they sometimes struggle to move quickly and adapt to a changing transportation landscape.

Culture and Values

The combining of companies sometimes leads to a clash of two very different cultures, with customers stuck in the middle. If your logistics provider is acquired or merges with another company, you need to ask questions about the new organization’s way of doing business. Will you continue to work with the same specialists who are most familiar with your company? Can you still reach the CEO on the phone when a high-level decision is required? Maintaining an intimate provider-customer relationship is crucial if you expect the 3PL to serve as an extension of your company’s transportation department.

If the 3PL you work with is purchased by a larger competitor, the new arrangement will hopefully work to your company’s advantage. Perhaps your company will see no interruption in service, or even benefit from better technology or a larger array of resources. It is important, however, to go into a 3PL acquisition with your eyes open and alert to any possible changes.

Sources: The Wall Street Journal, Supply Chain Standard, Inbound Logistics