Friday 18th Oct 2019 - Logistics Manager Magazine

Is there really “lots of scope for further consolidation”?

This may be a gutsy move, but I’m going to challenge some comments yesterday from the new chairman at DSV Panalpina, Professor Thomas Plenborg.

“Once we’re 12-18 months into the integration of Panalpina, and we can affirm we’re on track, then I think we’ll start to talk about the possibility of boosting organic growth through another M&A,” said Plenborg.

So, as it sets about merging two powerhouses of the international air and sea freight markets, DSV Panalpina has already got a twinkle in its eye looking at the road market.

“The industry is still very fragmented, and there’s lots of scope for further consolidation.”

It’s at this point I’m going to argue against that motion. Call me foolish…

Firstly, I’d like to know what Professor Plenborg means by a fragmented industry. And where this industry is actually fragmented.

Road, Denmark, Scandinavia, Europe, truck, landscape, trees, fields

I’m going to take a moment to assume here that he means the Road market, as he directly refers to the DSV Panalpina Road division as being ‘ready to scale’ once its new transport management system comes into place… and says that additions in this area will be attractive.

Given DSV and Panalpina’s existing infrastructure in Europe – especially DSV’s on the Road side – again it is here that I assume is where we are referring to the fragmented industry.

Now I disagree as to how fragmented to road transport market for third-party logistics actually is.

Road transport in Europe is fragmented because it is a very local activity. Throughout Europe, and especially in the UK, there are thousands of road transport operators handling materials for retail, manufacturing, automotive, construction and there is a reason that this list is virtually endless – it is because the customer base is virtually endless.

At a cross-border, pan-European level there are fewer players, especially of those that would be appealing enough to fit the ambitions of DSV Panalpina. I will concede to Professor Plenborg that there are a few eye-catching names in that space though…

Realistically, there are just a few targets in the UK right to fit in DSV’s Road division. Shareholders at Wincanton or Clipper Logistics could receive an offer they can’t refuse. I’m struggling to think of anything else in the UK that would be appealing.

And the key problem for DSV Panalpina? All the good targets have been taken. Especially in the UK. DHL bought Exel, XPO bought Norbert Dentressangle (which in turn had bought Christian Salvesen), Kuehne + Nagel even got in on the European groupage market when it bought RH Freight almost a decade ago… Don’t forget, before DSV merged with Panalpina, it walked away from a bid for CEVA Logistics last year, a move that would have much improved its Road freight activities.

3PL road transport is far less ripe for consolidation that it at first appears. Unfortunately, DSV Panalpinia might be the fourth largest road freight service provider, but is behind the curve when it comes to consolidation in the road market.