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Drewry sees further consolidation with 3PL companies in 2021 by ‘carriers with deep pockets’ to meet shipping lines’ goal of becoming an end-to-end logistics solutions provider
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Container shipping has identified logistics as the growth driver that will earn the industry extra returns
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Maersk completed last year a series of acquisitions to boost its 3PL credentials
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After acquiring CEVA in 2019, CMA CGM in September 2020 acquired a 30% stake in passenger airline Groupe Dubreuil Aéro
Following a highly successful 2020, large container shipping companies may continue to acquire logistics providers and technology platforms this year to meet their goal of becoming an end-to-end logistics solutions provider, Drewry predicts.
With the container shipping sector last year realizing one of its best periods financially, Drewry underscored the possibility of more consolidations in the logistics/3PL businesses in 2021 by “carriers with deep pockets.”
In its analysis, the transport and shipping consultancy said carriers may opt for more vertical acquisitions for the following reasons:
- Further horizontal consolidation—container carrier acquiring another container carrier—has been halted, and no major transactions have taken place after 2017
- Previous consolidations over the years have taken supply out of the market and rationalized the supply-demand imbalance, and now there is little scope for further consolidation that will protect the currently favorable industry dynamic
- The window of opportunity for more mergers and acquisitions or M&As has narrowed with fewer operators to absorb
- The top 10 ocean carriers now control more than 80% of the total capacity market share, and further mergers and acquisitions or M&As may draw scrutiny from antitrust regulators
Drewry said the container shipping industry is now shifting its acquisition focus to the value-added services provided around shipping, identifying logistics as the growth driver that will earn it extra returns.
This has pushed large ocean shipping companies to engage in M&As with the intent of offering more end-to-end supply chain services such as inland transportation and freight management.
In the case of Maersk, the Danish transport and logistics group completed last year a series of acquisitions to boost its 3PL credentials. This included acquiring complementary businesses such as US-based warehouse and distribution company Performance Team, and brokers KGH Customs and Vandergrift.
Moreover it invested in German forwarder Forto and the US trucking broker Loadsmart that directly compete with its forwarder customers. Towards the end of the year, Maersk’s parent, A.P. Moller Holding, announced that it will acquire food packaging company Faerch Group.
Besides acquiring a few businesses, the group developed two initiatives—an instant pricing product and an internal sales channel—that allow it to compete with multiple segments of the forwarding industry. The instant quoting and booking platform Maersk Spot, unveiled in June 2019, is now being used by many forwarders, accounting for 51% of spot volumes at the end of December 2020, observed Drewry.
Meanwhile, while CMA CGM is already present in the air freight business through its purchase of third-party provider CEVA Logistics in 2019, the carrier made its first move into asset-based air cargo in September 2020 when it acquired a 30% stake in long-haul passenger airline Groupe Dubreuil Aéro; the completion of the deal is still pending.
South Korean ocean carrier HMM could also join the logistics industry like its peers. Drewry noted that in his New Year message, HMM’s CEO stated that the company should move beyond container shipping and develop a substantial logistics business.
However, HMM still has a long way to go compared to rival integrated logistics providers Maersk and CMA CGM, both of which are global terminal operators and logistics providers.
Drewry also noted that Maersk’s substantial liquidity reserve of US$11 billion makes it by far the stronger containership carrier with the ability to grow both organically and inorganically and expand in the future.
“While Maersk will update its transformation plan, with metrics for 2020-25 on 11 May 2021 (Capital markets day), its management has indicated that it is preparing an acceleration of its transformation plan. We think the plan would focus more on future verticalisation, opportunities and growth,” Drewry said.
For its part, CMA CGM, with its strong free cash flow generation and history of growing inorganically, is a likely candidate to pursue more M&As in the 3PL space, said Drewry.
Photo by Johan Taljaard on Unsplash
