Big fish eats little fish
The international logistics industry has familiarised itself with the concept of mergers and acquisitions over the years, with a growing number of companies fuelling their expansion by purchasing smaller players in the marketplace. The strategy has become commonplace in the Middle East too, with regional heavyweights such as Agility, Gulf Agency Company (GAC) and Aramex marking their entries into international markets by acquiring the operations of local companies.
According to Essa Al-Saleh, chief executive officer of Agility, the global market for outsourced logistics will be valued at approximately US$590 billion by 2010, which represents an unprecedented level of opportunities for logistics companies to expand. "Although a large amount of this growth will be organic, there will be a great deal of activity in mergers and acquisitions too," he told Logistics Middle East.
Given Al-Saleh's confidence, it's hardly surprising that Agility is strolling down the acquisition trail, with recent purchases including France's Medway Group, Spain's Combalia Transportes Internacionales, New Zealand's LEP International and Kenya's Starfreight Logistics Limited. In addition, it seems China and India will host the next generation of its acquisitions over the next five years.
Refusing to be left behind, Aramex has openly declared its ambitions to become the fifth largest logistics service provider in the world by 2010. Although critics might question these towering aspirations, the company has made considerable progress towards its target by acquiring companies in the European market, including the UK's Priority Express and Dublin's TwoWay-Vanguard. However, it seems the bulk of activity has been earmarked for the future, with Aramex allocating US$200 million for acquisitions in key international markets, including Asia and the United States. It is currently negotiating for a major stake in a leading Asian company, which cannot be named at the moment, but details should be finalised later this year.
"For 25 years we have been operating among fierce international competition, but we have achieved continuous progress due to our strong infrastructure," says Fadi Ghandour, the company's founder and chief executive officer. "We are planning for acquisitions in key international markets to further consolidate and leverage our global network."
Companies such as Agility and Aramex have clearly demonstrated the benefits of acquiring existing companies, which avoids the hassle of 'starting from scratch' in new markets. Instead, the purchaser will receive an established portfolio of services and facilities, together with experienced employees and long standing contracts, which provide the perfect foundation for future growth.
However, its important to remember that acquisitions in the logistics sector are a two-way process and not limited to Middle East companies wanting to venture into new shores. The industry is currently buzzing with news about Dubai's Swift Freight being acquired by South Africa's Barloworld Logistics. This might appear unexpected, especially considering Swift's stellar track record and future development plans, but it's easy to understand why the company is such an attractive proposition for acquisition. In addition, Issa Baluch has confirmed the deal was friendly and he will continue to play an important role in the company's future operations.
However, a couple of questions arise from this development. Is this the start of things to come? Will other small and medium sized logistics companies in the Middle East be next? We'd love to hear your comments, please send your views to firstname.lastname@example.org