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Is this start of something big?
Page 20
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The UK's logistics firms will be looking nervously around following Deutsche Post's E3.7bn agreed takeover of Exel. Could this lead to further consolidation in the market? Jennifer Ball reports.
Deutsche Post's agreed takeover of Exel came as no great surprise; rumours have been flying around for months of possible bidders for the firm. The deal is nowhere near complete, but promises to have a huge impact on the rest of the logistics market.
But with just a year to go until Deutsche Post loses its monopoly on the German postal market the potential benefits of a takeover were clear; combining Exel's £4.9bn freight management and contract logistics departments with its DHL business would create the world's largest logistics firm with a combined workforce of around 500,0(X) people.
Cost savings The acquisition would, by combining the operations, enable Deutsche Post to make cost savings of around £149m a year from 2008 and extend its reach in the UK and Eastern Europe. It would also strengthen its position in North America, Asia-Pacific and outside the parcel sector.
Chris Morgan, Datamonitor's automotive and logistics analyst, says: "Exel has always been more dominant in the UK, while Deutsche Post is a bigger player in Europe so it was a good fit." But he warns that there is concern among customers about the problems of integrating the two companies.
As is always the way when a company takes over another there are concerns whether or not account managers may take their eye off the ball as they could be more concerned about job losses rather than looking after its customers — the lifeblood of the firm.
Analysts suggest that this acquisition might trigger further buyouts, with mid-sized companies as the primary targets. There is overcapacity in the market and consolidation is needed as operators' customers demand larger suppliers. In addition,smaller companies are struggling to achieve the growth rates of their large competitors, such as Excl.
Christian Salvesen in the UK has resisted several takeover bids in recent years, but its wellpublicised difficulties leave it vulnerable to predatory rivals. TDG, another mid-sized logistics player, is seen as a target too. "Wincanton will now have to reconsider its position in the market. It will have to look at developing the niche markets which Exel won't look at, or making an acquisition, which it will have to do outside the UK now to strengthen its position in Europe.
"Wincanton is also under threat of being acquired. Exel was always top of the shopping list, but now this has fallen off the shelf potential buyers will have to look to companies further down the Line."
Strategic fit The Freight Transport Association's chief economist, Simon Chapman, says the acquisition is symptomatic of how the logistics market has split into developers of third-party logistics on one side and integrators on the other.
"Exel was a good strategic fit for Deutsche Post, combining a developer and an integrator. If this takeover works over the next couple of years it may become a template for other companies, but it is still too early to say."
As expected,Exel's competitors remain remarkably quiet about the agreed takeover. Both Wincanton and Salvesen declined to comment on the effects of this on their future. si