Big Deals Dominate 3PL Sector, Report Says

Big deals have dominated the 3PL (third-party logistics) market, according to a report published last week by Armstrong & Associates Inc., a supply chain management market research and consulting firm specializing in strategic planning, logistics outsourcing, competitive benchmarking, mergers and acquisitions, 3PL service/cost benchmarking, and supply chain systems evaluation and selection.

In January of 2014, FedEx purchased GENCO, a high quality, value-added warehousing and distribution (VAWD) third-party logistics provider, for $2 billion. In August, Norbert Dentressangle expanded to the U.S. by purchasing Jacobson Companies for $750 million in cash. Then, in the spring of 2015, Norbert Dentressangle sold itself to voracious acquirer XPO Logistics for $3.5 billion. Along with the U.S. and Europe, Asia has seen significant large deal volume making 2015 potentially the largest year for $100 million plus deals.

These acquisitions are reflective of a 3PL sector that is now dominated by around 50 companies based in post-industrial countries. These third-party logistics providers have scale based on geographical coverage, IT and processes that create threshold levels which bar smaller rivals from overtaking them by organic growth alone.

Picture from Cerasis, a top North American third party logistics company

In 2014, the Global 3PL Market expanded to $750.7 billion and the U.S. 3PL market grew 7.4% to $157.2 billion. Two U.S. 3PL market segments experienced double digit growth. Both were domestic segments reflecting U.S. economic growth. Non-asset based domestic transportation management (DTM) gross revenues grew 15.4%, while net revenues grew 20.5%. Dedicated contract carriage (DCC) gross and net revenues both increased by 10.4%. DTM is the modern and sophisticated offspring of freight brokerage. DCC provides dedicated truck capacity in a market often dominated by tractor shortages which are driven by a lack of drivers. DCC is a primary protection mechanism for shippers when demand outpaces supply.

The complete report and other A&A market research can be found at www.3plogistics.com/shopsite/index.html.