In this special edition of Supply Chain Matters This Week in Supply Chain Tech we highlight today’s announcement from global ocean container carrier Maersk in the acquisition of two B2C E-commerce providers.
Global ocean container services provider A.P. Moeller Maersk today announced plans to acquire two different regionally based B2C E-Commerce logistics fulfillment companies.
The first involves the acquisition of Salt Lake City based services provider Visible Supply Chain Management (Visible SCM), a business to consumer (B2C) services firm delivering logistics services across the United States. Visible SCM utilizes a geographical network that places fulfillment centers closer to the consumer, with less distance and faster delivery. The company’s E-commerce fulfillment network is currently configured to be able to deliver goods to 75 percent of the U.S. population within 24 hours and reaching 95 percent within a two-day delivery window.
According to the announcement, all regulatory approvals and closing conditions have been obtained and the parties successfully closed on this transaction on August 2. The enterprise transaction value is noted as $838 million post IFRS-16 corresponding to an EV/EBIDA multiple of 13 times earnings. Visible SCM’s 2021 forecasted revenues were estimated to be around $550 million with a post-IFRS EBITDA of upwards of $65 million and a margin of 11.8 percent.
The second acquisition involves the intention to acquire Netherlands based B2C Europe Holding B.V. (B2C Europe), a logistics and online customer fulfillment provider serving mostly Western European based customers. B2C Europe’s core offering is in parcel delivery services servicing both retailers and brands as well as for logistics operators, with a focus on cross-border deliveries. It operates a multi-carrier platform with a significant reach and volumes into all European countries through what is described as an extensive carrier network. The enterprise value of the transaction is valued at $86 million post IFRS-16 which corresponds to an enterprise value of 11 times earnings. Forecasted revenues for 2021 are estimated to be around $140 million with a post-IFRS EBITDA of upwards of $8 million, reflecting a margin of 5.7 percent. The transaction is still subject to closing conditions and regulatory approvals and is expected to close in Q4 2021.
Both of these acquisitions are part of Maersk’s stated strategies to expand capabilities beyond shipping and into land-based logistics services, and in this case, E-commerce logistics fulfillment services. The announcement indicates that Maersk’s strategy is to build an asset-light, global business focused on two core capabilities, B2C fulfillment and B2C delivery based on a flexible technology backbone. Today’s announcement reinforces that these capabilities will be targeted for the world’s three largest E-Commerce regions, Europe, North America and Asia. The goal is to provide the carrier’s existing and future customers to sell and fulfill customer needs across multiple channels. Implied is a further ability for shipping and beneficial customers to have total visibility of material and inventory movements across ocean, inter-modal and logistics fulfillment segments.
Today’s announcement comes in conjunction with this carrier’s announcement of Q2 financial performance, which was headlined with over $5 billion in quarterely profits, a 200 percent increase amid skyrocketing container rates not seen in 30 years of industry history. Total revenues reportedly increased upwards of 60 percent to $14.2 billion.
This week, a major industry milestone was noted with container rates from China to the U.S. West Coast scaling to a level of $20,000 per 40-foot container, which is astounding. Maersk CEO Soren Skou indicated to equity analysts that the carrier’s earnings and added cash flow will enable targeted acquisitions along with added cash returns to shareholders.
Supply Chain Matters Perspective
In prior commentaries focused on this industry leader we have noted Maersk’s strategic intent for becoming an integrator of customer logistics and container last mile delivery needs. The strategy as defined in late 2019 was diversifying parts of the carrier’s business through tuck-in acquisitions beyond just global shipping. That included areas such as inter-modal surface transportation, operating warehouses and the scaling the land logistics side of Maersk’s business model. Several prior acquisitions have occurred.
Today’s announcement adds an additional focus toward the hot and growing segment of B2C customer fulfillment. From our perspective, the key to this entire strategy was access to more Cloud based advanced logistics and customer fulfillment technology.
The industry giants of E-Commerce B2C fulfillment are both Amazon and Alibaba each of which continue to invest billions in advanced logistics and customer fulfillment physical asset and systems capability with a focus on 1-2 day and same day customer delivery at highly scaled volume levels.
Both Visible SCM and B2C Europe are not of the scope and capability of the above two online fulfillment market influencers, and for that matter, the equivalent of a Shopify or other prominent existing B2C fulfillment players. However, today’s announced acquisition move involving two different but arguably smaller regional players provides Maersk access to an established base of customers particularly in the small and medium business segment for direct E-Commerce capability needs. It further avoids any increased objection from various geographic global regulators.
Competing with an Amazon or Alibaba provides much broader dimensions of capabilities, some of which are asset related and some of which are likely to garner added scrutiny.
From the dimension of broader technology alliances, Maersk has forms of B2B partnerships with both IBM Watson and B2B logistics and transportation Cloud platform provider E2open.
A further aspect will be the memories and impressions of the many businesses that are now reeling from the unprecedented exploding transportation costs and imbalanced supply and capacity demand market conditions in ocean container shipping. The notion of exploding profitability funding added acquisitions and added cash dividends for shareholders in the midst of take it or leave it spot rate conditions are not likely to leave a pleasant taste and a sense of trust.
© Copyright 2021, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.