Consultant Insight: 2020 starts with a rollercoaster of acquisitions, partnerships and breakups

With a new year comes a flurry of activity, and this year the activity seems to have been amplified, with acquisitions, partnerships and breakups all being announced before the end of January.

A number of factors contribute to this activity: First and foremost is the fragmented nature of the supply chain business: analysts have beat this drum on a regular basis over the years, always warning of an eventual shakeup. Perhaps 2020 is the year we’ll see their prophecies realized.

In addition, digitalization efforts, e-commerce and Amazon’s growing footprint in the logistics sector may finally be leading businesses to form relationships to either survive or in service to these trends. New opportunities such as cool-chain services, for example, are expanding rapidly as consumers demand fresh foods. The growth of temperature-controlled pharmaceutical airfreight demand drives some of these new deals, as well.

But perhaps one of the more interesting reasons has to do with the complexity of global trade, which is complicated even at its most basic, and barriers thrown its way create frustration and added costs for shippers. At the same time, this complexity creates opportunities for supply chain providers, and especially freight forwarders. In 2019, for example, we witnessed a number of acquisitions of customs brokerage and consulting firms to help ease this angst among shippers and further broaden the scope of forwarders’ services.

The trends to look for this year in supply chain M&A activity are:

• Servicing e-commerce logistics requirements;
• Cool chain;
• Customs brokerage;
• Speed to final customer; and
• Logistics technology solutions.

In an early example of these trends, SEKO Logistics, a 3PL and forwarder, began 2020 with a bang by announcing two acquisitions and a partnership, all of which expand on its growing international services. A unique player within the supply chain space, along with its more traditional services, SEKO also has a particular specialization in cross-border e-commerce since acquiring a majority share in strategic partner Omni-Channel Logistics Australia in 2018. Its two newest acquisitions of GoodShip International and Air-City were announced in January, to expand services at SEKO’s Chicago and New York hubs, respectively.

GoodShip provides various services including customs brokerage, compliance, air and ocean freight offerings for shippers across several verticals, focusing on trans-Pacific, eastbound cargo movements. Of the Air-City deal, a SEKO statement mentioned the advantages of “immediate depth in the growing westbound airfreight and cross-border e-commerce trade for goods going to China.” Furthermore, and an additional bonus for e-commerce providers, Air-City also expands SEKO’s ability to handle shipments into China through its freight consolidation services, bundling volumes together on behalf of clients to save on shipping costs.

And finally, only this week SEKO Logistics announced a strategic partnership with Air & Ground World Transport (AG World). SEKO said the partnership gives its customers “greater access to the Southeast Asia market with AG World’s significant airfreight tonnage and scalable capacity platform, while AGWorld clients in the high-tech, retail, manufacturing, healthcare and other industries can plug into our U.S. network, third-party logistics and forwarding expertise, cross-border parcel platform and portfolio of services.”

But wait, even more acquisitions were announced this month, many within the U.S. trucking market. After a couple of amazing years for the trucking market, 2019 was a struggle for many trucking firms, with some declaring bankruptcy and others simply deciding to close their doors. This month, among the several acquisitions were announcements that J.B. Hunt expanded its last-mile capabilities by acquiring RDI Last Mile. Meanwhile, Nolan Transportation Group acquired Eagle Transportation, a provider of cold chain logistics services.

The freight brokerage business also continues to attract interest with GlobalTranz Enterprises acquiring Cerasis, a TMS provider; NFI acquiring G&P Trucking, a provider of port drayage and freight brokerage services; and Transplace acquiring Lanehub, a provider of cloud-based platform for shipper-carrier communication — all just in January.

Finally, in perhaps the most jaw-dropping news this month, XPO Logistics announcing a review of its business units for a possible sale or spinoff, with only its less-than-truckload (LTL) business unit appearing to be safe. According to XPO’s most recent annual report, the LTL division has 290 terminals, about 8,000 tractors and 13,000 truck drivers in the U.S. and Canada. The company serves shippers in more than 75,000 next-day and two-day lanes. It’s a big business, only behind FedEx Freight, which is considered the largest LTL provider according to various rankings. XPO could potentially get bigger if it decides to target other LTL providers in the U.S. market — Old Dominion? YRC Freight? Roadrunner? Stay tuned, as this drama has yet to unfold.

Meanwhile, up for grabs are XPO’s European supply chain and transportation businesses, its North American transportation business, excluding LTL but including its truck brokerage business, and its supply chain business that covers the Americas and Asia. XPO’s truck brokerage business up for possible sell would certainly be the end of an era for XPO, as it was how XPO Logistics first began.

All of this is to say, if the rest of 2020 is anything like the month of January, buckle your seat belts — 2020 looks to be quite an active year for supply chain mergers and acquisitions.