Third-Party Logistics Mergers and Acquisitions Activity Drives Further Industry Consolidation

November 10, 2015

The last two years have been a time of large, strategic acquisitions resulting in significant consolidation among the top 50 global third-party logistics (3PL) providers. Combinations from mergers and acquisitions activity are color-coded in the table below.

Table 1. 3PL M&A Consolidations Displayed Among Top 50 Global 3PL Providers

In the U.S. and Europe, XPO Logistics has led the way with its acquisitions of Con-way, New Breed Logistics, Norbert Dentressangle and UX Specialized Logistics.

In October, XPO Logistics acquired Con-way for $3 billion, or a low 5.7 times earnings before interest, tax, depreciation and amortization multiple (given the asset-intensive nature of the deal). The acquisition includes Con-way Freight, Menlo Logistics, Con-way Truckload and Con-way Multimodal. The deal pushes XPO’s 3PL revenues (not including the Con-way trucking operations) to approximately $8 billion based on 2014 revenues and makes XPO the 7th largest global 3PL provider behind DSV (with the pending UTi Worldwide acquisition). Brad Jacobs and his XPO team have made 2015 the largest 3PL M&A year for deals over $100 million at 11, since Armstrong & Associates (A&A) began tracking activity in 1999.

Figure 1. 3PL Acquisitions Over $100 Million (1999 – November 3, 2015)

Menlo Logistics had 2014 gross revenue of $1.7 billion, net revenue of $748 million, and manages a warehousing network of 138 warehouses totaling 21 million square feet. It has significantly grown its China and Southeast Asia network, which will be a nice addition for XPO. Menlo has also done very well in expanding its European operations. Both regions have added significant pieces of business with marquee customers such as Amazon and Triumph in Europe, and Puma and Starbucks in Asia.

XPO will benefit from Menlo Logistics’ lean management approach and capabilities, which should help operationally with the recently acquired Norbert Dentressangle operations and position XPO to develop more business.

Menlo has a growing domestic transportation management (DTM) 3PL market segment operation. Con-way Multimodal is a top 35 DTM/freight broker, and Menlo is a prime contractor for the U.S. Transportation Command’s Defense Transportation Coordination Initiative and the lead logistics provider for truck manufacturer Navistar. Menlo is also a key 3PL provider for BP, Hewlett-Packard, General Motors, and Dow.

The New Breed deal which closed last September had a multiple of 8 times earnings before interest, tax, depreciation and amortization (EBITDA) which has gotten to be in the acceptable range for a value-added warehousing and distribution (VAWD) 3PL provider. This deal reflects a successful private equity venture for previous owner Warburg Pincus. Warburg made an investment in New Breed in 2005, held it for 10 years and sold it to XPO for a high multiple.

The Norbert Dentressangle purchase for $3.5 billion was a major step for XPO. Dentressangle has large European operations and had recently expanded in the U.S. by acquiring Jacobson Companies. The Jacobson multiple was 9.8 times EBITDA and reflective of the 3PL providers’ mixed operations.

While skeptics point out that XPO still has not turned a profit, it is getting closer and the Con-way acquisition will push it into the black. Either way, the accumulated losses do not seem to deter conservative investors. The Ontario Teachers’ Pension Plan, Canada’s Public Sector Pension Investment Board and GIC, Singapore’s sovereign wealth fund and 12 institutional investors have increased their holdings.

The largest problem for XPO in Europe may be maturity and lack of growth in most large economies. However, Menlo has overcome these challenges, in part, by concentrating on developing Eastern European economies and targeting of high-value industries and customers.

In October, Denmark based DSV announced the pending acquisition of UTi Worldwide. UTi Worldwide was founded in 1995 and has over 21,000 employees. The $1.35 billion acquisition is expected to increase DSV’s annual revenue nearly 50%. In 2014, DSV increased gross revenue to just under $8.7 billion (an increase of 6.4% over 2013 figures). This acquisition will place DSV just below competitor C.H. Robinson in terms of size and add further distance between itself and competitors such as CEVA Logistics, SDV (Bolloré Group), XPO Logistics, and Panalpina.

The acquisition of UTi Worldwide will most directly benefit the DSV Air & Sea Division. DSV has solid freight forwarding operations and should be able to turn the UTi operations around. In 2014, DSV increased air freight metric tons 10.9% to 288,000 and ocean freight TEUs increased 8.2% to 835,000. The UTi acquisition will enable DSV to offer a broader range of services and move it to approximately 5th on A&A’s Top 25 Global Freight Forwarders List.

In 2014, the warehousing square footage for DSV was 23.7 million with 250 facilities. DSV remains focused on servicing automotive and high-tech companies. Key customers included Hewlett-Packard, Hitachi, Philips, Pirelli, Porsche and Volvo.

In August, UPS acquired Coyote Logistics for $1.8 billion in a combination of debt and cash. The purchase price makes the estimated multiple a lofty 15-18 times EBITDA. Both companies are top 50 global 3PL providers. UPS SCS is a very solid value-added warehousing and distribution 3PL provider with a nice integrated small package and international transportation management offering. With the addition of Coyote, it would have significant non-asset based domestic transportation management capabilities in the U.S. and UPS’s operations will benefit from the additional contract truckload capacity managed by Coyote.

Since being founded in 2006, Coyote has grown to $2.1 billion in gross revenue. The combination makes UPS SCS (assuming Coyote would be part of the 3PL operation) the 9th largest 3PL provider globally based upon 2014 gross revenues. The question is how well the cultures will blend. UPS is an established “big brown machine” and Coyote is a young “work hard, play hard” entrepreneurial company. Hopefully, UPS will let Coyote flourish and won’t disrupt its culture.

Coyote was founded by Jeff Silver and provides domestic transportation management services to customers in North America. Jeff was part of the very successful management team that founded and grew American Backhaulers, Inc. Backhaulers was sold to C.H. Robinson Worldwide at the end of 1999 for $100 million in cash and $36 million in stock.

Coyote received a significant investment by Warburg Pincus in 2007 and grew very rapidly using a split sales and operations domestic transportation management/freight brokerage model. The split model allows Coyote to arrange transportation for more shipments per employee versus traditional “Eat what you Kill” brokerage operations. In traditional operations, the person who secures a shipment from a customer, also finds a carrier to cover the load. In the split model, sales staff focus on securing shipments and carrier capacity staff focus on securing carrier capacity to transport the shipments. Coyote has also been a leader in terms of service performance and has helped position non-asset based domestic transportation managers as being as reliable if not more reliable than working directly with carriers in securing capacity.

Coyote has also developed transportation planning functionality within its proprietary transportation management system “Bazooka” which allows it to optimize transportation modes and routes. This is a competitive differentiator versus less technically savvy freight brokers.

Kuehne + Nagel’s purchase of ReTrans in August indicates the high level of interest by major companies in being part of the expanding DTM segment. The Americas have been Kuehne + Nagel’s bright spot growth area for 2014-2015. Some business segments, such as Overland in Europe, have done poorly. The A&A estimated purchase price of $180 million is appropriate given non-asset DTM multiples of 10 to 11 times EBITDA and growth potential.

ReTrans was founded in 2002, had 300 employees, and $500 million in yearly gross revenue. It ranks 18th on A&A’s Top 100 DTM/Freight Broker List. The purchase also reflects a trend in which the largest 3PL providers are adding to their skill sets and ability to fill expanded customer opportunities. That also sets the stage for more competition among major 3PL providers. For example, Kuehne + Nagel now adds DTM to its traditional international transportation management (ITM) and value-added warehousing and distribution (VAWD) businesses. C.H. Robinson added ITM with its purchase of Phoenix International and has successful European transportation management operations.

Another large, U.S./Europe based acquisition is FedEx’s pending purchase of TNT Express. While not a true 3PL purchase, this deal has significant impact because of the dramatic expansion FedEx will be making in Europe where TNT is still a major package player despite a rash of management missteps over the last decade. European regulators need to be realists and realize that TNT has run its course and approve this deal.

Closer to home, FedEx purchased GENCO, a high quality VAWD 3PL provider. The multiple was a lofty 9.8 times EBITDA. This move gives FedEx a major expansion into VAWD making it more competitive on a combined service basis. It provides a strong competitive answer to UPS SCS and DHL Supply Chain.

Echo Global Logistics continued to expand through acquisitions. It made another small, bolt-on acquisition – Xpress Solutions. Then it bought fellow Chicago freight broker, Command Transportation. Command’s owner and CEO, Paul Loeb, will remain as a key player in the combined operation. Loeb was part of American Backhaulers with Jeff Silver, CEO of Coyote Logistics. Loeb and Silver left when C.H. Robinson acquired American Backhaulers in 1999. The multiple was 10.5 times EBIT. Command had revenues of $561 million with an EBITDA of $37 million. The multiple was 11.4 times EBITDA. Command’s operations were more traditional truckload brokerage providing significant synergies between the two operations.

While the last year was a time of cashing out for private equity investors, Greenbriar Equity Group LLC, the major owner of Transplace, made a large investment in transportation manager SEKO Logistics. SEKO has been around for over 20 years but has never really been able to become a mainstream 3PL provider. Greenbriar has a history of getting challenged 3PL providers oriented — expect to hear more from SEKO.

Using 2014 gross revenue figures, the percent total global 3PL market share from the top 50 3PL providers (after 2015 mergers and acquisitions) is 38% of the $751 billion global 3PL market. Looking forward to 2016, we may not see as many large $100 million deals, but ongoing market consolidation is expected.

A&A’s list of 3PL acquisitions since August 2014 (including pending deals) is provided in Table 2.

Table 2. Select M&A Activity (August 2014 – November 3, 2015)

AcquirerTarget CompanyAcquisition DatePurchase Price (US$M)EBIT* or EBITDA** MultiplierTarget Company Entity Type
Roadrunner Transportation SystemsActive Aero Group418781158**Private
Norbert DentressangleJacobson Companies418807509.8**Private
XPO LogisticsNew Breed Holding Company418846158**Private
C.H. Robinson WorldwideFreightquote.com4200936510.7**Private
XPO LogisticsUX Specialized Logistics42044597.2**Private
Radiant LogisticsWheels Group4209679.812.7**Public
Japan Post HoldingsToll Holdings4215250699.1**Public
Kintetsu World ExpressAPL Logistics42153120015**Public
Echo Global LogisticsCommand Transportation4215642011.4**Private
XPO LogisticsBridge Terminal Transport Services421561008.1**Private
XPO LogisticsNorbert Dentressangle4216335309.1**Public
Radiant LogisticsService By Air42163124.5**Private
Roadrunner Transportation SystemsStagecoach Cartage and Distribution4221335 (plus an earn out cap $5M)5**Private
Kuehne + NagelReTrans4222018010**Private
United Parcel ServiceCoyote Logistics42234180015**Private
XPO LogisticsCon-way423073,000 (includes $290M of net debt)5.7**Public
XPO LogisticsCon-way423073,000 (includes $290M of net debt)5.7**Public
DSVUTi Worldwide1Q161350.34x SalesPublic
FedExTNT Express2Q164,300 (less net cash)24**Private

Sources: Primary, Company Information; Secondary, A&A Estimates


Armstrong & Associates, Inc. is a supply chain management market research and consulting firm specializing in mergers and acquisitions advisory, strategic planning, logistics outsourcing, competitive benchmarking, 3PL service/cost benchmarking, and supply chain systems evaluation and selection. Armstrong & Associates’ Who’s Who in Logistics Online Guide to Global Supply Chain Management provides Internet access to its continually updated 3PL database. Recent research papers include “PICK IT: The Business of Warehousing in North America – 2015,” “Right Price: Modern Freight Brokerage in the U.S.,” “Big Deal – 2014 3PL Results and 2015 Estimates,” “Global and Regional Infrastructure, Logistics Costs, and Third‐Party Logistics Market Trends,” “Trends in 3PL/Customer Relationships,” “3PL Brand Recognition, RFP Activity and Expected Profit Margins for 3PLs – 2013,” and “Mexico: Trucking, Railroads and Third‐Party Logistics Market Report.”

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