A strategic perspective of the TNT Express acquisition by FedEx

Résumé du document

This report presents the merger between FedEx and TNT in detail, which constitutes one of the largest mergers in the courier delivery service industry. In the first section, the sector will be described, followed by an overview of both companies involved. After that, a thorough analysis of the deal will be provided, where the perspectives and motivations of both companies involved are examined. Finally, we will present relevant theories and discuss further by applying them to the specific characteristics of the FedEx TNT merger.

The international courier delivery service industry uses advanced logistics to carry out shipments through a sophisticated network from anywhere in the world and in a very short period of time. The industry is highly concentrated at the international level as, because of its business modus operandi, scalability is a necessary condition to profitability (European Commission, 2013). By 2015, the year of the merger, there were four main players in the global express industry.

Extraits

[...] We can thus observe the presence of absorption in this case. FedEx decided, for instance, to integrate marketing, administrative and IT workforce, compensation and compliance programs, as well as to consolidate the IT infrastructures and computer systems of the two companies (FedEx, 2016). In terms of Procurement (combination), day-to-day operations remained relatively independent, existing agreements with service providers were maintained and new agreements with prospective suppliers were carried forward (Berman, 2016). Hence, on this level the two company units work together as peers. [...]

[...] This came down to approximately 8 per ordinary share of TNT Express, or a 33% premium over TNT's closing stock on April (FedEx, 2015). According to the official statement that FedEx made to its investors, the deal included non-financial agreements related to the TNT Express employment terms, the location of the regional European headquarters and the role of significant logistic hubs. Also, the complete airline sector of TNT Express was divested in order to comply with regulations regarding airline ownership FedEx perspective In the acquisition press release FedEx explained its main strategic reasons for the acquisition (FedEx, 2015): • Combining complementary strengths will result in a strong global competitor in the logistics and transportation industry. [...]

[...] Next to these challenges, companies are facing pressure from financial investors regarding the value created from the M&A. Finally, the success of the deal depends dominantly on the successful capturing of identified syn- ergies. If managed correctly, M&A processes can and will ultimately enable the acquirer to create benefits for all stakeholders involved. Appendices Value Chain Analysis for Delivery Service Industry From: Gabriel, E. (2006). Value Chain for Services A new dimension of “Porter's Value Chain”. IMS International Journal References Berman, J. (2016). FedEx executives offer up additional insights on TNT acquisition. [...]

[...] This ultimately explains the lower premium offered by FedEx. Looking at the situation of FedEx & TNT today, we need to note certain drawbacks in the integration process. FedEx has been struggling to boost profits as planned through its strategic investment initiatives. Although revenues generally rose, margins remained largely invariable. Also, integration expenses have increased above the expected value (FedEx, 2017; FedEx, 2018). Negative market movements in the sector such as increasing fuel prices posed unexpected challenges for the firm during the generally demanding integration process. [...]

[...] Thus, the synergies require different levels of integration. In ascending order of level of integration, this means: Connection, [Combination, Customization], Consolidation. From this theory, we arrive at the conclusion that the level of integration required in the FedEx - TNT Express case can be described as rather high due to the types of synergies involved. Conclusion After the analysis of synergies and post merger integration process which allowed us to understand the value created in this merger, we take a look back at the premium paid in this deal. [...]