The power of the small deal
Mergers and acquisitions booming. An analysis.
Lothar Thoma and Clemens Hartig, of Gebrüder Weiss, were invited by the Propeller Club, Port of Basel to address the current takeover boom from a practical perspective.
Mergers and acquisitions are on almost everyone’s lips these days – especially in the logistics industry. The long periods of measures to combat the outbreak of Covid-19 only led to a brief slump. “The market has regained its momentum,” said Lothar Thoma, managing director for air and sea with Gebrüder Weiss (GW), talking to members of the Propeller Club, Port of Basel, together with Clemens Hartig, executive assistant to GW’s management.
Not every deal is the same
The current bull market isn’t only down to increased interest from financial investors in the logistics sector, in an environment of low interest rates. It is simultaneously a homemade issue. “Carriers somehow have to reinvest their massive profits,” as Hartig pointed out.
Shipping lines in particular – depending, of course, on their overall strategic approach – are expanding their radius of action vertically, as Maersk has done with its takeover of freight forwarders. Others focus on adding complementary services, as CMA CGM, amongst others, is currently demonstrating by developing its own air transport fleet. Further long-term market developments will show whether the money has been invested profitably.
Nevertheless, it’s not so much the number, as the volume of large takeovers that is driving up statistics. “There was an exceptionally large number of big deals in 2021,” Thoma explained. Nevertheless, it’s interesting to look at medium-sized companies, where the question of sale or takeover often arises in a completely different form. The markets and the business models of companies involved in takeovers are as individual, after all, as their business situation before such a move, which often needs to be preserved.
Sometimes a takeover can be triggered by a succession issue, as was the case with Jöbstl, in Styria (Austria), which brought reorientation measures in its wake. In another case, that of the forwarding firms BAS and Luible, the Raben Group wanted to strengthen its German transport solutions. Rhenus, in turn, was seeking to consolidate its network in Eastern Europe by taking over Loxx. Last but not least, Gebrüder Weiss wanted to consolidate its market position in Bulgaria by taking over a subsidiary of Rhenus there.
Hurdles and expectations on both sides
The fact that price expectations have reached a peak these days isn’t the only hurdle takeover deals face, in Hartig’s opinion. “Markets are normalising again now, margins are falling, and staff turnover is growing.” A deal can still work, even in the pandemic, as with GW’s acquisition of Ipsen’s air and sea business in Bremen. “We partially completed the due diligence processes online in 2020,” Thoma recalls. The sticking point, however, always remains implementation. Even when a deal is reached, “80% of mergers and acquisitions don’t meet targets,” Thoma said.
Visiting every site and addressing employees directly is a classic way to start after the deal. However, it remains particularly important to fulfil the promises made, which can be a challenge – migrating an IT system, for example, especially in the context of the pandemic. Finally, managers face the biggest challenges. Thoma pointed out that “the new culture has to reach every staffing level.” The message was well received in Basel. The ensuing discussion was lively.