XPO – too big too fast? Or Amazon strategy?

XPO Logistics has made close to 20 acquisitions since 2009 driving the business’ inorganic growth from no-ones radar to a major player in the industry with over $8bn in revenue.

The case for why they are doing this has been hotly debated from competitors and press alike. 

What’s at stake? 

 

From our vantage-point, we have two theories on the outcome of XPO’s M+A strategy.

 

XPO has grown from a multi-million dollar revenue business to a multi-billion dollar one in the span of around 5 years. This has been driven by a combination of visionary leadership, an industry in need of consolidation, the availability of private equity and cheap/free money.  With such a huge component of what XPO is looking to achieve in the logistics space based on company culture and technology, can XPO truly consolidate 20 different businesses into one unified structure in less than 5 years? 

 

XPO’s number of employees jumped from 10 000+ to 52 000+ and doubled their customer base on the back of the ND acquisition alone. It’s likely to take a matter of years not months for XPO to realize its goal of one ‘cohesive, single-minded focus’ organization with IT and company culture probably playing the biggest challenges to tackle. 

 

The first theoretical outcome for XPO is what happens when interest rates rise?  

 

Inorganic growth will likely slow down once this happens, as money will be more difficult to access. Will XPO have positioned itself at this point as a logistics leader, capable of surviving on squeezed margins? Will it have developed a clear enough differentiation from its competitors to continue its stellar growth?

 

The other theoretical outcome we see is XPO creating an end-to-end solution, from ‘clicks to bricks’ - providing shippers with a one stop solution for all their logistics needs, from intermodal and freight forwarding to the last mile and even a foray into eCommerce portal hosting perhaps. As the industry asks whether Amazon is a 3PL – maybe they should be asking whether XPO is an Amazon competitor. 

 

This Amazon strategy is clearly in motion, but still requires a number of critical pieces of the puzzle to truly stand up to Bezos’ behemoth. Looking at XPO’s recent moves – last mile, trucking etc. – it would seem that technology driven logistics solutions and dedicated eCommerce solutions are the predominant missing pieces of the puzzle. 

 

XPO has a lot going for it – it’s acquisition strategy has already made it a major force in the $1tn + logistics industry; its leadership is visionary, and clearly set on redefining the culture of big-business logistics; it has significant finances on hand for further acquisitions. However, time is ticking, interest rates will rise, will XPO have enough time to go head to head with Amazon?