Consultant Insight: XPO Logistics may sell its freight forwarding division

XPO Logistics may be considering a sale of its freight forwarding division valued between $400 million and $600 million, according to published reports. The freight forwarding division facilitates ocean, road and air transportation, and assists shippers with customs brokerage processes. XPO’s network includes company- and partner-owned locations and covers key trade lanes that reach 190 countries. [caption id="attachment_69752" align="alignright" width="351"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] In terms of revenue, the division is one of the company’s smaller groups: In 2018, reported revenue was $338 million, which dropped to $299 million in 2019, and then recovered slightly in 2020 to $300 million. In 2021, the freight forwarding group was placed into XPO’s Brokerage and Other Services segment. While the overall group increased revenues year over year, the forwarding group was not mentioned in XPO’s annual report. If the speculation is correct and XPO’s freight forwarding division is for sale, it could be a good acquisition for a mid- to relatively large domestic logistics provider looking to expand its portfolio of services beyond domestic offerings. Transportation and logistics M&A Capacity, risk mitigation and technology capabilities are the main drivers of the current acquisition landscape . The transportation and logistics industry noted 89 merger and acquisition (M&A) transactions in 2020, up from 84 in 2019, according to BKD CPAs and Advisors. Continued recovery and momentum led to a 12-year high of 126 closed M&A transactions in 2021, marking the fifth consecutive year of higher M&A volume. Consulting firm PwC noted that deal value for the 12 months prior to Nov. 15, 2021, increased 84%, and deal volume increased 11% compared with 2020. The value growth was driven primarily by deals in the rail, logistics and passenger air sectors. In contrast, the growth in volume was mainly driven by deals in the logistics, vehicle rental and leasing and trucking sectors. In its quarterly report, PwC noted that companies are focusing on near-shoring opportunities to gain more control over their supply chains and diversify risk as they manage challenges surrounding China-focused supply chains. Sourcing is also a key focus as companies move away from China-centric supply chains. Inventories have spread beyond warehouses to include stores, and logistics has become a key differentiator for companies when fulfilling customer expectations for quick, reliable delivery. Visibility technologies for supply chains are also of interest from an acquisition perspective. “Supply chain dependency and disruption have driven investors to the deal-making table as they seek to navigate generational changes in the sector,” said Darach Chapman, PwC’s transportation and logistics deals leader. Freight forwarding as M&A Interest Neither BKD nor PwC, however, mentioned freight forwarding as an interest in logistics and transportation M&A. Perhaps, the trend of digital forwarding and the fact that traditional freight forwarders are now being considered integrated, third-party logistics (3PL) service providers is holding back acquisitions of freight forwarders. XPO’s freight forwarding division is described as “a scalable, asset-light service managed with advanced technology” in its recent investor presentation. While the division’s “advanced technology” could be of interest to potential acquirers, its book of business may be of most interest. However, XPO Logistics in a March presentation reported plans to create two stand-alone companies —less-than-truckload (LTL) and tech-enabled brokered transportation, of which freight forwarding is a part. Is XPO having second thoughts, or has an interested suitor emerged for the freight forwarding division? Many questions will likely be answered by the end of the year.

Consultant Insight: XPO Logistics may sell its freight forwarding division

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