M&A activity in the logistics sector is gradually picking up in tandem with the global economic recovery. For instance, across the pond, FedEx has just acquired GENCO. In addition, certain microeconomic trends specific to logistics markets are also stimulating acquisition activity. One particularly interesting trend in Europe is post offices adopting increasingly aggressive acquisition strategies.
The notion of European post offices becoming fully fledged logistics providers is nothing new. Most famously, in the 1990s, Deutsche Post embarked on a globalisation strategy which took it from being the German postal authority to Europe’s largest transport company by 1999. By the end of 2005, it was the world’s largest logistics company. In short, this was achieved through a swathe of acquisitions which gave it dominance across the whole logistics spectrum.
And while no European post office is currently trying to become the next logistics giant, many are expanding their scope of transport and logistics services through acquisitions. There is almost no alternative route for post offices to go down. Letter mail volumes are in terminal decline, continuously eroding the profitability of universal delivery obligations. It is a case of diversify or bust. All over Europe this challenge is being taken on, though it seems that the Scandinavian post offices have the most aggressive acquisition strategies at present.
PostNord (a merger of the Swedish and Danish post offices) has made 15 acquisitions over the past five years, mainly targeting the road freight and contract logistics sectors. It is estimated that from 2010 to 2014, the company has acquired Scandinavian road transport and contract logistics providers with combined revenues of €349m and 2,300 employees. Its biggest purchase in recent times was Green Cargo Logistics in 2012, Sweden’s largest 3PL according to PostNord (net sales of €126m and 260,000 sq m of premises in Sweden and Denmark). Another field it has identified for expansion is document management. In 2013, it acquired Swedish, Danish and Polish firms in this area.
Norway Post has also been highly aggressive, making ten acquisitions in the last five years, spending a similar amount as PostNord. At least seven of its acquisitions were aimed at expanding its Scandinavian road freight network. The sum of the revenues of these seven providers is estimated to be €259m. Six of these companies were wholly acquired, adding 819 employees. The remaining company was Danske Fragtmaend, Denmark’s largest part-load freight company, which Norway Post acquired a 34% share of in 2013. Dankse Fragtmaend has revenues of over DKK2bn (€268m). Over time, Norway Post plans to acquire all the shares in the company. Danske Fragtmaend has 3,300 employees, 1,500 vehicles, 22 freight terminals and 20 warehouses. In addition to road freight, it offers contract logistics, parcel delivery and express services.
Finally, the Finnish post office Itella has made eight acquisitions over the past five years. However, it has gone in a different direction to its regional rivals. Six of its purchases are related to the company’s objective of solidifying its presence as the leading Nordic operator in products and services related to financial transactions and processes. Its other takeovers were a Finnish groupage transport provider with revenues of €130m and 800 employees and a small Estonian self-service parcel terminal business. In October, the company announced a change in strategy to focus on Scandinavian road transport, where it believed it had a firm foothold and the possibility to increase its market share. Conversely, it would withdraw from its air and sea forwarding operations as well as its service warehouses in Sweden, Norway and Denmark.
Overall, the message to take is that through acquisitions, post offices have emerged as serious competitors to major European logistics providers in markets such as road freight and contract logistics. At least in Scandinavia and likely throughout Europe, while the big players are always concerned with each other, increasingly they are keeping a close eye on ‘local heroes’ such as PostNord, Norway Post and Itella.
For more in-depth analysis of European M&A activity in the transport and logistics sector, check out Ti’s latest report, European Logistics: Mergers and Acquisitions 2014.