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Great Time to be in the Supply Chain Space

Tom Sanderson, chief executive officer of the progressive third party logistics firm Transplace, recently told an audience of shipper and carrier representatives in Dallas: “It’s a great time to be in the supply chain space.”

And he’s absolutely right. The 3PL business has continued to be the healthiest market within the slow five-year economic recovery for domestic and international freight transportation. In the United States, the market was valued at more than $154 billion in 2014 by industry analyst Armstrong & Associates, and globally has reached above $720 billion. Most shippers continue to farm out some aspect of the nitty-gritty of their transportation and logistics operations to these very capable entities.

But the market remains incredibly fragmented. No surprise then that the major players also view this as a time to buy up former competitors to plug gaps in their service and geographic portfolios.

Since the start of the year, there has been a proliferation of merger and acquisition activity. Most notably they include XPO Logistics’ purchase of Norbert Dentressangle, Echo Global Logistics’ acquisition of Command Transport, Kintetsu Express’ takeover of APL Logistics, Japan Post’s Toll Holdings buy, Forward Air’s absorption of Towne Air Freight, and C.H. Robinson finalizing its purchase of Freightquote. Not to mention private investment firm Greenbriar Equity’s purchase of a controlling stake in SEKO Logistics.

According to Thomas Albrecht, a noted industry analyst with BB&T Capital Markets, there’s a “healthy book of earnings” among the big 3PLs right now, which allows them to more easily reach mutual takeover agreements. Non-asset entities, like 3PLs, are also attractive to private equity because they don’t bring along the perceived deadweight of transportation assets.

Read more here.

May 24, 2015