At Gilead we seldom comment publicly on the vendor's perspective in respect of mergers and acquisitions in the logistics and freight forwarding space. 

Wheresoever Gilead exclusively provide services for the acquirers of those businesses it makes little sense for us to engage on matters of the seller’s side of the ledger, or merger strategy in general. We might, however, reflect upon observations of the vendors' experience in the dozens of M&A processes we have lived through in our career.

In most cases, where we have observed sellers before and after their sale process, the merger & acquisition has involved a private business, moreover overwhelmingly they were tightly held. In addition, the notions that we wish to focus on today are those that are often omitted in the general M&A discourse.  In order to do that we might start with one of those well recognised M&A actor’s lines and talk to the said omissions.”

“Any fool can buy a company”, said Henry Kravis, “you should be congratulated when you sell.”

Well we say “yes, of coarse Henry”; and due to Gilead’s stated mission when serving our clients, we heartily agree.  But where might we discover the omissions?

A glaringly obvious omission is, of coarse, timing.  As we have often said in this blog on other matters, luck features prominently in determining timing.  The principal means of making your own luck as a proprietor, however, is to recognise early (from a realistic review of your own circumstances) that you will inevitably need to dispose of your stake in the business; and to address the timing and means of disposal within your business plan.

Entanglements often represent both risk and opportunity so the path to exit them must be planned carefully.  Where such entanglements are clearly visible to staff, customers, and agents, there must be a finely honed narrative strategy in order to preserve value.  The first thing to recognise in that strategy is the interests of all the parties.  The proprietor that has done the best job in respect of the narrative, that which effectively addresses each set of interests, will see the best value retention.   The buyer has a vital interest in the success of the seller’s mission in this respect and the structure of the sale will, in part, be influenced by it.

The likes of Henry Kravis, Al “Chainsaw” Dunlap and the regular management consultant archetypes have an Achilles heel when it comes to M&A in the people-to-people services industries.  It is plainly the element of legacy culture which retains loyalty, and subsequently, revenue. 

Asset minded capitalists believe that buying something they identify as inefficiently run, and wringing its neck by means of being more demanding – cutting costs, and extinguishing culture, is by rote a value adding exercise.  In a people-to-people business, however, this is not proved in real life retention of relationships and revenues.

For the vendors in our business, the emotional attachment they have for their business sometimes manifests itself in ways that reduces the value in their business during the sale process.  The best way we have seen to ameliorate this negative for both the vendor and the buyer is to identify the right fit correctly in the first instance, and to understand each other’s culture, so that some cohesive narrative path emerges that improves upon the mantras lifted out of a management consulting textbook. 

Some vendors, often those heavily emotionally attached to their business, have difficulty accepting the notion that they should buy into “fit”.  The idea of walking out clean is one bred in their minds of the things they have seen go array in respect of post-sale remittance and warranty outcomes in other businesses.  Unfortunately for them Mr Market with the chequebook has an unequal & opposite view of this proposition, based upon industry m&a process outcomes.  The answer to this conundrum, for the party that for practical purposes will inevitably eventually sell in any case, is to circle back on the “fit”, “culture”, and “narrative planning” issues.  They should work singly, and even at times in conjunction with the best prospective buyers, for your particular business on those issues.

And timing?  One tip is that most of the businesses now coming to market are businesses that should have sold nearly ten years ago.  Many are out there “trying to make it back to what they would have got”.  Usually, however, past time on a tightly-held business is not a circular process, it is just past time.


Note:  Gilead interests extend to research in respect of the vendor market in the freight forwarding, logistics, and transportation market space.  However, we neither represent vendors, nor do we seek compensation from them.

In my view, to describe the Australia and New Zealand (ANZ) international transportation trades as typical of north-south markets is both apt and misleading.

In respect of the dominance of the commodity trades in export tonnage it is apt, but in respect of the lack of distinctiveness of the ANZ mercantile markets, it is misleading.

The case I provide here is that, based upon that distinctiveness, strategically it now is a good time to invest in the ANZ transportation market

The ANZ mercantile goods markets have always appealed to EU and US mercantilists seeking low risk markets for high value products; it is a market where tariff and non-tariff barriers do not significantly deter trade. 

Traditionally, other north-south trades have involved increased political and transactional risks that at various times have manifested themselves in capital controls and other barriers, or risks, to the continuity of trade.

In many ways, the Australian international maritime container and air freight trades have, in the past decade, become more sustainable.  For asset owning international carriers, in particular, the lessening of inbound vs outbound volume imbalances, and the greater availability of vessels, has made it especially so for the Asian trades.  

The lesser volume imbalances in trades has largely been brought about by the more innovative employ of unit loaded niche commodities that are moved more deeply and directly into foreign consumer markets than can be achieved by bulk transportation. 

At this point, however, to address challenges to the significance of the ANZ markets as seen through western eyes, during the past 3 decades in particular, it is necessary to engage the broader subject of freight management perspectives among global industry players that evolved during the period. 

The first perspective to engage is that of those freight companies that have come to regard themselves as more global in their orientation, and look at the world differently than they did when their performance in their home country market ranked first in their management collective’s imagination.

In earlier times, mercantilist home markets demanded mercantilist minded, and hence export centric, freight executive managements.  With the advent of the offshoring of consumer goods production, and the globalisation of such sourcing, the increased prominence of inbound and east-west trades brought about a subsequent dominance of central management’s attention directed toward those primary east-west trade lanes, and to the import-distribution oriented global customers supporting them in those trades.

Global customers, typically, have introduced global service requirements; and increasingly have sought to employ global contracting in freight bargaining that focuses on the value achieved in primary trade lanes.  The ANZ market is heavily represented among global customers, being among the most open markets for direct representation by global merchandising and consumer goods companies, so it has tended to be heavily influenced at the customer interface downstream of these events.

Given the above, there has been a corresponding local ANZ transportation industry tendency to focus on the negative downstream effects perceived as arising from lesser levels of influence; such sentiments finding expression when ANZ freight and import-distribution industry executives lament the rise of a global transportation industry attention deficit in respect of the ANZ freight trades.

It is also important to recognise the evolved perspective of the Asian theatre regional freight manager fulfilling their strategic role for contemporary global freight companies.  It is difficult for those managers operating in a highly engineered environment to move beyond the view that they should leave well enough alone in a small volume corner of the Asian theatre called ANZ, one that bears little resemblance in trading patterns and style to the far larger east-west trade Asian export markets.  Consequently, any subsequent attention deficit generated might be expressed as a natural consequence of ANZ as a market being limited to the level of priority displayed by their global customers’ voices.

This perception changes fundamentally, however, when the rise of the intra-Asian trades as a whole is contemplated.  If the freight decision and the nurture of essential customer support is regarded as emanating from within the Asian-ANZ theatre itself, where a multiplicity of trade lanes of distinct characteristics are meaningful and material to decision makers, and where a more traditional mercantilist sentiment is recognised, then the freight management support task must be upgraded and decentralised in order to support it.  

In respect of the Asia-ANZ maritime trades, this view is nothing new, and has long been recognised as the prevailing commercial environment by the most successful and longstanding shipping lines.  Among most global freight forwarders and global airlines, however, such a view generally diminished, or perhaps can be appropriately expressed as having been buried by the significance of global managers being distracted when serving the European and American consumer trade prerogative. 

Hence my contention is that the rise of the intra-Asia trade lanes generally means consequential change for the ANZ transportation industry, and more so for the freight forwarder than for the carriers that have long spread the burden of customer engagement in these trades, those that were perceived to have diminished on a global scale during the growth of the east-west trades.

For ANZ, the negative point of reference of being absent from participating in the dominant Asia-EU and Asia-NAM consumer goods trades is likely to be removed with the rise of the intra-Asia trades.  It is a good time to choose to invest in ANZ freight forwarding and domestic asset carriers.