At a time when corporate muscle is often required to overcome the depressed global freight market situation, takeovers, mergers and alliances are becoming a frequent source of conversation in the SA freight industry. And it’s not only here, but worldwide, as companies battle to stay in front in times where survival is often a result of acquiring extra market share in an industry where the market pie is getting decidedly smaller. For some time, observers have been keeping a close eye on the global shipping lines, which have been sorely tried by a market where demand has been plummeting, but overcapacity – fed by the delivery of large numbers of mega container ships – has significantly pushed up the supply side of the equation. But the forecast takeover/ merger trend in this industry has not transpired. Rather the lines started to indulge in major alliances, and where large even began to be allied with equally large. On the local scene, this has been highlighted in the last week with CMA CGM (the world’s third biggest container carrier) allying with AP Moller/ Maersk (the world’s number one) on a number of SA trades. Airlines (except in the US) have been largely exempt from the takeover/merger scene. But multi-airline alliances have become almost the norm in this industry – like the 13-member OneWorld, the 18-member SkyTeam and the 28-member Star Alliance, of which SA national carrier, SAA, is one. What of the clearing and forwarding industry? Yes, we are definitely seeing the start of a takeover trend involving SA, said Dave Logan, CEO of the SA Association of Freight Forwarders (Saaff), citing the most recent examples – the Bridge Shipping group being taken over by Dutchbased Steinweg, and Turners Shipping acquiring the DTB Cartage shipping business. And he added that he had heard a number of hints about other companies being involved in negotiations, although he said he would hesitate before saying who might be taking over whom. “We are definitely part of an international trend in the logistics industry,” Logan said, “and I think that there will be more acquisitions and mergers in the future.” Another observer told FTW that there were distinct advantages in takeovers, at a time when market conditions were tight, and competition getting towards the cut-throat stage. Rather than a relatively slow internal expansion of a business, with a takeover a company immediately gets a larger set of resources at its disposal – which includes manpower, inventory and other assets. With the larger set of resources, efficiency is increased – which, in turn, increases the output. The increase in output leads to lower costs of producing services or products, which is the input. “The increased output or lowered input definitely translates to better business growth for any entity,” he added. “Another advantage of a takeover is that brand awareness increases as the business expands, allowing more advertising, products and services.” Also, in the competitive SA market, those lower service production costs give a company the distinct advantage of being able to offer competitively better pricing levels – without necessarily reducing cash flow to unsustainable levels. “There is also an advantage in any synergy you gain in a takeover,” the commentator added. “The combined company can often reduce duplicate departments or operations, lowering the costs of the company relative to the same revenue stream, thus increasing profit.” A company also shows distinct gains from the increased revenue/increased market share.
