How the DSV-Panalpina Merger Will Affect the 3PL Industry
DSV’s $5.5 billion merger with Panalpina in August 2019 is one of the biggest deals in the third-party logistics (3PL) industry in the recent past. This merger has the potential of disrupting the 3PL industry in the markets where DSV and Panalpina are active (North America, Europe, and LATAM) as well as substantially impacting other regions across the world. Panalpina had been negotiating terms of a merger with DSV since April 2019, after rejecting an acquisition deal from Kuehne + Nagel International the year before.
In the immediate aftermath of the merger, Panalpina’s shares will be delisted from the SIX Swiss Exchange, while the company will be subjected to downsizing over the next few months. Although the integration process is only expected to be complete by 2022, there has already been a change in the board of directors and executive leadership of Panalpina.
Another impact of this merger is that it will help DSV achieve synergies by consolidating its logistics, IT infrastructure and operations verticals, while the addition of Panalpina’s current clients to its portfolio will see DSV increase its revenue by almost 50%. With a combined revenue of around $18 billion, DSV-Panalpina will now feature on the list of the top 5 third-party logistics companies in the world as well as ranking as one the world’s largest air-sea freight companies, with a global workforce of almost 60,000 employees across 90 countries.
Another implication arising from this tie-up is that it might intensify the pre-existing price war in the 3PL industry. The DSV-Panalpina merger is expected to encourage another season of aggressive mergers and acquisitions among rival companies as they try to survive in this new era of competition, mirroring similar events that the 3PL industry had witnessed a few years ago.
Both companies offer almost similar supply chain solutions with the key difference being that where DSV has a stronger presence in road transportation, Panalpina has traditionally focused more on the air-sea freight business — particularly in the European market — and has expertise in providing specialized 3PL solutions to the energy industry. The merger thus enables the new conjoined entity to venture into new geographical markets where it can leverage the established presence of either DSV or Panalpina. These halves thus complement each other in providing a complete supply chain solution to shippers at affordable rates compared to their competitors.
For clients of contract logistics, the merger will create substantial warehousing capacities, as Panalpina’s 1.2 million sq. m will be added to the DSV’s existing 5 million sq. m of warehouse space.
Shippers stand to gain immensely with the DSV-Panalpina merger, as the new integrated 3PL company’s enhanced geographical presence will allow shippers to rely on a single supplier for all their supply chain needs at the global scale, hence bringing efficiency in their vendor management. Shippers also stand to benefit with cost-saving opportunities in sea-freight as DSV-Panalpina becomes one of the world’s largest freight forwarder companies that enjoys better negotiating power with container shipping companies like Maersk and CMA-CGM. This puts DSV-Panalpina in a better position to realize those savings opportunities to their clients.
The merged company, DSV-Panalpina, will possess competitive advantages in terms of scale and a broadened scope of service offerings. Other major 3PL companies, especially freight forwarders, should be wary of its potential to create an intensely price-driven market. The DSV-Panalpina merger could possibly even lead to more mergers and acquisitions in the highly fragmented freight forwarding industry.
Shippers, however, will be attracted to the new company’s added warehousing capacities, complete specialized supply chain solutions to key industries, and the attractive rates they can offer with their increased negotiation power with major container shipping companies.