An appetite for acquisition: Geographic expansion, capacity constraints fuel industry investments

This year’s seismic airfreight boom delivered an unprecedented demand for cargo operators, creating a unique landscape hungry for mergers and acquisitions. New market growth, geographic expansion, additional capacity, and cargo sectors like cool-chain and e-commerce logistics are fueling one of the hottest acquisition markets in industry history. “There’s a lot of money sitting around that investors have been waiting to spend for quite a while, and I think this year we’re seeing them roll out the checkbook a little more readily,” said Cathy Roberson, president of Logistics Trends & Insight and an Air Cargo World columnist. Denmark’s DSV — ranked No. 3 in Air Cargo World’s Power 25 ranking — in April acquired Kuwait-based Agility’s Global Integrated Logistics unit for $4.1 billion, just two years after its major purchase of Swiss-based Panalpina in 2019. Agility provides a geographic expansion for DSV, in addition to an expansion of freight forwarding and contract logistics operations, Roberson said. The move strengthens operations in emerging markets like Africa , while also gaining additional and critical warehousing capacity in Asia-Pacific and the Middle East. “Agility has always been known for their focus on emerging markets, [and] this gets DSV right in the emerging markets and they’re willing to pay to play in this space,” Roberson said. "There’s a lot of issues when it comes to emerging markets, but with Agility’s knowledge and their infrastructure that they’ve already built out, that gets DSV ahead of the game.” A vast majority of other acquisitions have been a la carte pairings that, like DSV, bring companies into new regions or services. Swiss logistics company Kuehne+Nagel, ranked No. 2 in the Power 25, also sought to strengthen its position in the Asia-Pacific region in February with the acquisition of one of the largest Asia-based forwarders, Apex Logistics. Meanwhile, SF Holding Co., one of the largest Chinese package-delivery services, is planning to acquire a stake in Hong Kong-based Kerry Logistics network, broadening its footprint in Asian markets. This is a mere sampling of the year’s many strategic acquisitions within the airfreight community led by a pandemic-fueled push for digitalization, e-commerce, pharmaceuticals and cool-chain services. Although the end of 2021 is drawing near, there remains a growing appetite for industry stakeholders looking to consolidate services and expand into new regional or logistics markets. Opportunity in LatAm Near-sourcing from supply congestion , strapped capacity, rising airfreight rates and the growing demand for temperature-sensitive shipments have driven industry operators to look toward geographic expansion in regional markets. Although an increasing number of logistics companies and freight forwarders are expanding into new markets, many are targeting growth in Latin America for its rising perishables market and ability to support supply chain near-sourcing. Capacity dislocation in Latin America has also been severe and more prolonged than in other markets. In turn, consolidations have been rampant. A local subsidiary of U.S.-based forwarder JAS Worldwide, which made four acquisitions this year , expanded its operations in Latin America in January with the purchase of Sonave Logistica. In August, Sri Lanka-based forwarder EFL Global also expanded its Latin American footprint with the purchase of logistics company IDEA Logistics to bolster supply-chain near-sourcing as Asian supply chains face delays. “IDEA Logistics gives us a network of offices, facilities and equipment throughout the Central America region, [including in] Guatemala, Honduras, El Salvador [and] Nicaragua,” Evan Rosen, EFL’s president and chief commercial officer of the Americas region, recently told Air Cargo World . “We need to be able to offer customers services from origin all the way through to door, including the ability to be attractive to the carrier with transload facilities, turning those boxes back at the ports quickly and then moving the customer’s freight inland on domestic trailers.” France-based CEVA Logistics also recently expanded its presence in Latin America with its July acquisition of Colombian freight forwarder Cargex . The acquisition strengthens its footprint in the region’s perishables market which is expected to grow annually by 10% through 2024, Peter Penseel, chief operating officer of airfreight at CEVA Logistics, told Air Cargo World . “We have identified key geographic markets where we see significant growth opportunities to expand … [and] there are certain market segments or industries in which we want to extend our leadership,” Penseel said. “We are now a leading player in the perishables market in Colombia and more than tripled our country revenue. We plan to be a strong player in Latin American perishables through aggressive targets to grow more than 50% in all of its current country markets." Combating the capacity crunch Port and airport congestion have contributed to the severe lack of global transportation capacity and warehouse space, causing backlog. Forwarders are navigating this issue by directly acquiring companies with warehouse space, trucking networks and more. EFL Global, which has completed three acquisitions this year, has focused on obtaining additional capacity at John F. Kennedy International Airport (JFK), one of the major U.S. airports experiencing cargo congestion. In March, the forwarder acquired Seville CFS, Seville Transfer and Seville Transport companies to expand storage capabilities at the airport, according to a past release. And in September, EFL Global acquired container freight station and trucking service provider Complete Transport Services LLC, according to a past release. “There is no additional capacity in JFK,” EFL’s Rosen said. “It’s a major hub for us and a major airport hub for cargo inbound from around the world, and we need capacity, so the only way to get it now is to make acquisitions.” Illinois-based AIT Worldwide Logistics is yet another forwarder using acquisitions as a key component of its growth strategy following its recapitalization in March with The Jordan Company . However, company goals have been recently reshaped by the need for additional air capacity, AIT President and CEO Vaughn Moore told Air Cargo World . AIT has made two acquisitions this year, and recently gained 143,000 square feet of warehouse space through its August acquisition of Texas-based forwarder Intelligent Logistics . With facilities in Austin and San Antonio, Intelligent Logistics will aid AIT’s U.S.-Mexico cross-border growth plans, Moore said earlier this year. “When we can make an acquisition that can help us increase our capacity, whether it be on ground, ocean or air, we’re looking at how that can help the client and benefit them,” Moore said. “So, I would say that we have pivoted a bit into enhanced capacity solutions for our clients on companies that we’re looking to acquire.” Moore further noted that AIT is seeking acquisitions in the home delivery space, considering the capacity challenges in the truckload brokerage area. More consolidation ahead Although this year’s volatile, capacity-strapped landscape has resulted in dozens of acquisitions, more are expected as the pandemic has fueled new opportunities for the airfreight industry. However, with shippers having so many choices in freight forwarding, Roberson noted that other links in the air cargo supply chain need consolidation, such as trucking. “I think you will see more consolidation in trucking in particular, [because] there’s a shortage of truck drivers,” Roberson said. “The trend is to go more digital in managing trucking freight and, with capacity being a major concern in trucking in particular, I think these digital brokers are going to be attractive for acquisitions.” In fact, almost any type of transportation capacity is ripe for acquisition — including customs brokers —due to the growing demand for cross-border e-commerce logistics, Roberson said, leading more companies to consider putting themselves on the menu. “The unprecedented performance by companies has brought them poking their heads up to sell [even if] they never really looked at selling, but they almost would be irresponsible if they didn’t look around and see what the market looks like for selling,” AIT’s Moore said. “This is still the hottest acquisition market that I’ve ever seen in my career, [and] it is still the most active acquisition market.” Forwarders need to be extremely cautious with the companies they purchase, especially as the client base gets more demanding and services need to be consolidated to provide more complete solutions, Moore said. “While it’s still there, I think [the acquisition market is] tamping down just a little bit … but the acquisitions are still hot and heavy, and that’s going to continue on into next year,” he said.

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