The CEO of world’s largest logistics provider says business will focus for now on building services, technology internally and is steering clear of the sector’s increasingly active mergers-and-acquisitions market. Frank Appel has ruled out any M&A action by DP-DHL in the near future. He has said that while the German behemoth was still the largest, it should focus on itself. He added that the strategy was also true for technology.
While DHL’s Global Forwarding unit saw significant losses when it attempted to build and implement its own IT system, Mr Appel appeared undaunted, saying it would be better to grow organically and that the high valuations of tech-focused logistics companies like Flexport would deter DHL from considering acquisitions, for now.
The chief executive of DHL parent company Deutsche Post AG , said in an interview that the scale of the DHL’s forwarding, express and supply-chain business means there are few opportunities for significant combinations that would also pass muster with antitrust regulators. This leaves the company looking for growth and service expansion within its own operations.
“In global forwarding…there is a lot of M&A activity going on, but we are still the largest,” Mr. Appel said. “So we think it’s better to focus on ourselves.”
The German postal and logistics group reported $69.83 billion in revenue for 2018, up 1.8% from the year before, with the strongest growth in its express and global freight-forwarding divisions. Operating profit fell 15.5% for the full year, but DHL forecast that should rise to between $4.42 billion and $4.88 billion in 2019.
The company’s freight-forwarding and logistics operation is among a small group of businesses at the top of a highly fragmented world-wide market. The largest players, including Switzerland-based Kuehne + Nagel International AG and DB Schenker of Germany, compete for global contracts handling and shipping goods for the world’s biggest industrial manufacturers and retailers.
Kuehne + Nagel, second to DHL in forwarding and supply-chain revenue, according to market analysts Armstrong & Associates Inc., has made several small acquisitions in recent years to bring in new services, including the November 2018 purchase of U.S. time-critical business Quick International Courier.
In recent months, logistics operators in Denmark and Kuwait have been competing for control of Swiss freight forwarder Panalpina Welttransport Holding AG in an effort to gain market share and operations in more international markets.
Mr. Appel said DHL was rolling out technology and software improvements and is focusing on that instead of mergers, “because we think it’s better to grow organically.”
Buying a technology-focused logistics startup would be expensive, Mr. Appel said, because of the high valuations for companies such as Flexport Inc., which last month announced a $1 billion round of investment led by SoftBank Group Corp.’s Vision Fund.
“The prices are high,” Mr. Appel said. “That’s the reason why we would rather develop it ourselves,” adding that it “doesn’t mean that we won’t change our mind in the future.”