Why M&A Is the Right Option to Capitalize on Growth Opportunities in the Freight and Logistics Industry

Contents
1. Executive Summary 2. Why M&Aand Why Now? 3. M&A Market Observations 4. Where Does the Industry Go From Here? 5. Developing the Right M&A Strategy Is Key 6. Building Robust M&A Capabilities Is Critical to Execution 7. Conclusion 8. End Notes 9. About the Authors 4 5 6 8 11 12 13 14 15

Executive Summary
Following years of clear focus on cost reduction, freight and logistics (F&L) companies again are setting their sight on growth. Given that companies have aggressive growth targets that are difficult to achieve quickly in the current economic environment, it is likely that not all of this growth will be organic. Research conducted by Accenture has found that F&L companies were active users of M&A in the past decade and that M&A is becoming a particularly important tool for F&L companies to address their growth challenges.
In fact, after a marked decrease in investment activity in the F&L industry1 in the wake of the global economic downturn, M&A activity is regaining momentum and mega-mergers such as UPS TNT Express are returning to the stage. Our empirical study shows that M&A activity in the past 10 years was strongly driven by regional consolidation movements by global carriers, forwarders and 3PLs aimed at increasing market penetration. The data provides some early indications that F&L companies deal rationales are starting to shift. In Accentures view, these are a mere starting point. We have identified four key M&A trends that likely will unfold across the F&L industry in the next several years: 1. Consolidation is likely to continue because the F&L market remains highly fragmented. 2. The aspiration to attain a strong position near rapidly growing markets is likely to fuel M&A activity in emerging markets. 3. Chinas quest to quickly become an influential F&L player is expected to increase competition for potential Chinese targets, especially for those with favorable inland accessibility. 4. Specialist providers will become increasingly attractive targets for freight forwarders and contract logistic companies pursuing growth in verticals or complementary growth in value adding services. To capitalize on available M&A opportunities, F&L companies need to confirm they have the right M&A strategy in place to guide their effortsa strategy that is the result of close examination of how M&A can explicitly help the company achieve its broader strategic goals and in which situations M&A is the best option over organic and other inorganic initiatives. They also should be sure they have the capabilities necessary to successfully execute the deals they strikeespecially those related to identifying, screening and prioritizing targets, conducting due diligence, and planning and executing the integration of merging organizations, which Accenture has identified as particularly critical to M&A effectiveness. In the remainder of this paper, we explore these M&A trends in more detail and provide some guidance on steps F&L companies can take to position themselves to capitalize on inorganic growth opportunities in the next several years.

Why M&Aand Why Now?

After years of clear focus on cost reduction and performance improvement F&L companies are again actively pursuing their growth agendas and are evaluating inorganic growth options to achieve their financial targets. For an increasing number of F&L companies, M&A are a critical part of the solution.
F&L companies as a group have set aggressive financial goals for top-line growth, with many of the key industry players having communicated doubledigit growth targets to the capital markets. Yet the economic climate remains challenging and the environment for organic growth is competitive. Thus, F&L companies must develop a compelling and credible value-creation agenda that will convince investor communities they have the right vision and plan for growth. At the same time, F&L companies seek to improve their margins, something that is difficult to achieve in todays low-growth economic environments. The challenge is exacerbated by growing cost pressures from competition and increasingly demanding customers. Recognizing organic growth might not be sufficient to achieve their goals and honor their commitments made to capital markets, executives at F&L companies increasingly view inorganic growth as critical part of the solution. In pursuing inorganic growth, companies typically have three routes available to them: joint ventures (JVs), strategic alliances, and M&A. Each has its advantages and disadvantages, and the appropriateness of each varies by context. JV and alliance arrangements usually trade full ownership and control for lower risk and capital requirements. They represent a valid growth option, especially in times of higher economic uncertainty. Also, JVs and alliances with local companies can be the sole route of entry into promising but highly regulated emerging markets. India, for instance, prohibits foreign ownership of most businesses. Figure 1. Deal count and average deal size
76 69 68 55 38 25 27 42 30 13 56

2002 Deal Size ($m) 428

2003 1,231

2004 378

2005 990

2006 402

2007 412

2008 550

2009 1,725

2010 763

2011 2012 Q1 380 870

Thus, market entry must be achieved by teaming up with a local partner. In the current economic climate, M&A is the most relevant and increasingly attractive option for F&L companies to pursue inorganic growth for a number of reasons. First, some major F&L companies have accumulated significant cash in the past four years that they could readily deploy to purchase new growth-generating assets. Second, ongoing deregulation in emerging growth markets has made it easier to execute M&A deals in those markets. Third, the global F&L market remains highly fragmented, thus providing opportunities for further consolidation, especially for cash-rich players looking to use M&A to grow or diversify to achieve a competitive edge. Fourth, there are ample vertical industry opportunities, where loose and potentially unstable JVs and alliances might not deliver the degree of exposure and expertise transfer envisioned.

In fact, M&A activity in the F&L industry, which closely tracks the overall economic growth cycle, is regaining momentum with the improved global economy. As shown in Figure 1, M&A in the F&L industry2 grew steadily at the beginning of the new millennium, reaching a peak in 2008. Deal activity declined significantly in the wake of the global financial crisis and subsequent recession, but still remained above 2003 levels. Markedly reduced deal values in 2011 underpinned F&L acquirers cautiousness in response to an overall cloudy macroeconomic climate at the time, but those sentiments have given way to a more positive outlook in 2012. The announcement of the US $6.8 billion acquisition of TNT Express by UPS in March 2012 provides evidence that megadeals, in fact, can regain prominence.

M&A Market Observations

Our analysis of F&L M&A transactions larger than $100 million in the past 10 years2 has revealed some interesting changes in M&A deal making. First, in terms of geographical scope, M&A activity has shifted away from Europe and the US toward emerging growth markets in Asia Pacific and South America. We also found a growing tendency to go local in M&A transactions in recent years. Second, in terms of acquisition rationale, historical M&A activity was largely driven by consolidation movements. We are seeing some indications that acquisition rationales in some sub-segments are starting to move beyond consolidation.
Geographic Scope: Asian M&A activity and domestic deal making on the rise It is no secret that the emerging markets of Asia and South America have replaced the more developed economies of Western Europe and North America as targets for many companies growth initiatives. The F&L industry is no exception. M&A activity in Asia Pacific and South America hit a record high in 2010 on both the buying and the selling side. Today, more than 56 percent of M&A deals are targeted at companies from these regions. However, unlike in other industries where emerging-market deals are often initiated by companies from mature markets, F&L companies largely have eschewed international expansion in recent years. Nearly eight in 10 deals executed in the F&L industry in 2011 and through the first quarter of 2012 have been domestic3 in nature (driven largely by increased M&A activity in the Asia Pacific region and Asian acquirers preference for targets within domestic markets). This is a sharp increase from 2007 and 2008, when a slight majority of all deals done in the industry were cross-border transactions.

Figure 2. Inbound vs. outbound M&A investments 2002-Q1 2012 (in US$ millions)4

Target Nation
Europe
Total Invest 2002-Q1 2012 - t/o 2009-Q1 2012 Deal Size Min. Deal Size Max. Deal Size Total Invest 2002-Q1 2012 - t/o 2009-Q1 2012 Deal Size Min. Deal Size Max. Deal Size Total Invest 2002-Q1 2012 - t/o 2009-Q1 2012 Deal Size Min. Deal Size Max. Deal Size Total Invest 2002-Q1 2012 - t/o 2009-Q1 2012 Deal Size Min. Deal Size Max. Deal Size

North America
6,625 1,300 828 305 2,245 32,951 3,422 701 103 6,221 1,153 384 150 850 -

Asia Pacific
1,175 235 100 514 646 215 100 400 29,077 8,619 378 101 4,554 161 161 161 161 161 -

Central & South America

195 195 195 195 1,256 128 314 128 662 1,188 985 297 100 719 5,673 4,787 709 156 3,425

Middle East / Africa

856 587 428 269 587 -

Europe

62,804 11,737 604 101 9,849 9,368 7,377* 1,338 234 6,832 1,860 1,591 310 101 839 5,245 507 583 107 1,628 150 150 150 150 150

North America

Acquirer Nations

Asia Pacific

Central & South America

Total Invest 2002-Q1 2012 - t/o 2009-Q1 2012 Deal Size Min. Deal Size Max. Deal Size 2012 Accenture. All rights reserved.

Middle East/Africa

1,542 129 385 124 1,104 * Includes the nearly $7 billion UPS-TNT deal

On average across all geographies during that 10-year span, 62 percent of M&A deals in the F&L industry involved an acquirer and target from the same country, while 38 percent were crosscountry deals. Analyzing F&L M&A activity on a regional level shows an even clearer picture: The past ten years were all about regional consolidation (Figure 2). Acquirers from all different regions made the bulk of M&A investments acquiring targets from their home region. In terms of overall M&A investment, European F&L acquirers were by far the most active deal makers (US$ 72 billion). Overall M&A investment volume by Asian Pacific acquirers was considerably lower than by US acquirers (US$ 33 billion vs. US$ 44 billion). However, in direct contrast to their US and European counterparts, they made a much a higher proportion of their total M&A investment within the past three years (34 percent vs. 25 percent vs. 19 percent). American F&L companies have been most active in investing abroad, followed by those in Asia Pacific, Europe and Africa / Middle East. In terms of average deal size, Asian Pacific acquirers tend to be more cautious and primarily look for targets in the US$ 300 million range. American and European acquirers, in turn, have executed some larger acquisitions in equally mature markets as well. They also have adopted a more conservative M&A approach when investing in Asia Pacific.

Figure 3. M&A rationales by industry sub-segment4,5

Air Ocean Rail Road Mail Express Freight Forwarding Contract Logistics 12% 29% 22% 35% Intra Sub-segment
2012 Accenture. All rights reserved.

32% 56% 37% 52% 47% 18% 22% 22% Intra Segment 5% 16% 14%

64% 40% 42% 10% 23% 35% 30% 14% Intra Industry 24% 18% 18% 26% 30% Cross Industry

47 133 19 21 17 17 23 37

100%

Figure 4. M&A deal rationales by industry sub-segment and over time6

High

Diversication
Rail

Market Penetration

Geographic Proximity

FF Air Air Mail

CL

FF Rail

Mail

Road CL Ocean Road

Express Ocean

Express

Low Low 2002-2007

Diversication in New Markets

Geographic Expansion
High

Business Similarity
2008-2011

Deal Rationale: Consolidation and beyond From a sub-segment perspective, we found differing rationales for M&Aboth those transactions already executed and those projected for the future. We found ocean carriers and road carriers tended to focus more on consolidating within their sub-segments, while other segments especially freight forwarding (FF) and contract logistics (CL)tended to further blur the boundaries between the segments and use M&A to acquire capabilities that enable them to offer end-to-end supply chain solutions (Figure 3).

2012 Accenture. All rights reserved.

In breaking down this data by time frames, we found that, following years of strong consolidation focus before the financial crisis and recession, there are indications that acquisition rationales in some subsegments are starting to shift. As shown in Figure 4, M&A activities in most segments between 2002 and 2007 were strongly focused on either consolidation or on further penetrating existing markets. Recently, however, it appears several sub-segments are making a play for diversification (especially

freight forwarders, which are going asset heavy in Asia) and geographic expansion (in particular, express carriers, which are further emphasizing expanding their global scale, as the UPS-TNT deal illustrates).

Where Does the Industry Go From Here?

With the preceding historical analysis as a backdrop, we present what we see are the four key M&A trends emerging in the F&L industry. Considered together, these trends paint a picture of an industry that is moving toward greater consolidation particularly in the fast-growing emerging economies in Asiaas major players seek to add capabilities that enable them to offer a broader set of higher-margin services to an expanding global customer base.
1. Consolidation is likely to continue because the F&L market remains highly fragmented. The F&L industry historically has been highly fragmented and remains so today, despite the recent spate of M&A activity. Thus, increasing consolidation seems likely both among asset-heavy and asset-light players. In particular, we expect to see pronounced consolidation moves among asset owners in ocean freight, due to existing overcapacity on developed trade lanes and poor returns for financial investors. In freight forwarding and contract logistics, we may well see a large number of horizontal acquisitions targeted at companies with capabilities in complementary industry verticals. Geographically speaking, national consolidation opportunities in some segments are more constrained in mature markets, which could result in more pronounced cross-border or cross-regional M&A activity. This would reverse the trend we have seen in the past few years, when domestic deals dominated the landscape. 2. The aspiration to attain a strong position near rapidly growing markets is likely to fuel M&A activity in emerging markets. Ongoing industrialization of markets, continued manufacturing offshoring to new emerging countries, and rising domestic consumer demand will create a high cargo demand profile for top emerging markets for at least the forthcoming decade. Thus, we expect to see particularly high M&A activity among freight forwarders and contract logistics providers from developed markets targeting big Asian consumer markets as they seek to: Acquire knowledge of local customer requirements and a strong Asian platform Boost their market share on Asian emerging-market trade lanes Anticipate and take advantage of customer movements to shift production and sourcing decisionmaking power toward Asia, as well as supplier migration toward those markets Capitalize on massively promising growth prospects for contract logistics in these underpenetrated markets. However, while most of the focus is on large Asian economies, good connectivity to global markets and relatively low barriers to market entry also make smaller emerging markets in Asia (such as Malaysia, Indonesia, Thailand, and Vietnam), South America (including Chile and Mexico), and the Middle East (especially the United Arab Emirates) valuable prospects for M&A deals. While there are ample opportunities for F&L companies to strengthen their footprint in emerging markets, it is critical to invest in the right trade lanes in terms of shipper and commodity mix and margins appropriate to the individual business.

3. Chinas quest to quickly become an influential F&L player is expected to increase competition for potential Chinese targets, especially for those with favorable inland accessibility. Although China in 2005 opened up its F&L industry to wholly owned foreign enterprises, the countrys logistics industry is still highly fragmented and likely to move toward major consolidation and formation of large consortiums in next few years. However, it is not a given that movement will be driven mainly by foreign firms. In fact, our analysis shows that only a small percentage of deals done in China since 2008 have been crossborder transactions (Figure 5). As domestic policies and manufacturing companies shift the location of manufacturing bases to inland locales, and as the need to develop comprehensive domestic networks becomes imperative, we expect to see increasing competition for targets in areas with most favorable accessibility. Competition for remote targets is further fostered by governmental investments into logistics infrastructure development (such as railways, roads and highways). But with the Chinese government currently actively supporting consolidation (as evidenced by the significant M&A involvement of state-owned companies, passage of financial stimulus packages,

and growing investment in logistics infrastructure), domestic buyers will quickly grow larger and become more assertive deal makers. That means foreign F&L companies will have to move even faster if they want to buy their way into the Chinese growth market.

4. Specialist providers will become increasingly attractive targets for freight forwarders and contract logistics companies pursuing growth in verticals or complementary growth in valueadding services. A growing number of freight carriers and integrators is entering the freight forwarding and contract logistics market (including DHL, FedEx, UPS, and SCNF), thus further increasing competition and commoditizing the already low-margin forwarding business. To excel in this highly competitive industry, companies will need to create industry-specific solutions to win new business and cross-sell to existing clients, and especially to get access to the highermargin logistics business areas. F&L players have begun looking for sources of diversified revenue growth through capability purchases in previously separate or adjacent industries.

Accenture increasingly views these capability acquisitions as a critical component to increase industry specificity of services and as a key driver of innovation in F&L business models. We believe freight forwarders and contract logistic companies will increasingly look for adequate specialist providers to move toward end-to-end supply chain solutions (by filling gaps in current supply chain coverage or by increasing the depth of value adding services for certain verticals). The most obvious industry for this emerging M&A category is probably oil and gas. Some evidence already exists that ocean carriers are considering diversifying into the oil and gas drilling business, or acquiring engineering services companies to offer additional solutions to oil and gas clients. However, other industry verticals including automotive, high-tech and retail might offer similarly attractive opportunities. For instance, a contract logistics company may decide to extend its capabilities to offer its hightech companies pick-up and repair services, or help its pharmaceutical company clients manage the complex certifications related to shipments of drug compounds, or to seamlessly manage reverse logistics and recalls for drug and aviation companies.

Figure 5. Cross-border vs. domestic M&A deals in China since 2005

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+32% 6 5 3 2 100% 2006 Domestic deals 100% 2007 2008 100% 3 100% 20% 2009 2010 80% 17% 2011 83%

Cross-border deals

2012 Accenture. All rights reserved.

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Developing the Right M&A Strategy Is Key

Given the current and anticipated dynamics in the F&L industry and overall global economy, F&L companies should confirm they have a robust M&A strategy that articulates how and why they will approach M&A. Such a strategy will help F&L companies target M&A deals that strongly contribute to their near- and long-term pursuit of overall corporate objectives and to fulfill their commitments to investors.
A thoughtful M&A strategy is critical for several reasons. First, it provides a formalized roadmap for a companys inorganic growth agenda and helps provide stakeholders with a clear understanding of the M&A purpose. Second, it supports alignment among the management team, board of directors, and investors on such critical M&A issues as stakeholder risk tolerance and expectations. Third, it provides a framework for M&A deal execution, especially for target screening and evaluation. Importantly, an M&A strategy should not exist in a vacuum. Rather it should begin with an understanding of the key sources of strategic value and a confirmation of the principal directives in the overall corporate strategy. In essence, these directives address the markets in which the company wants to operate in the future; which products or services the company wants to offer; in which geographies the company wants to operate; and which customers the company wants to serve. The confirmation of directives helps reconfirm where a company is today and where it wants to go in the future. It requires a review of strategic needs and visions along the four dimensions covered by the directives and identification and evaluation of strategic gaps to current business. This task is far from trivial given the high degree of complexity and interrelatedness of decisions potentially to be made. A decision to pursue a direction on one of the strategic directives necessarily influences what a company would do on the other three and therefore requires unequivocal clarity of corporate strategic direction among executive decision makers. M&A strategy also is heavily influenced by a number of factors that might hinder or help its execution of the corporate strategy. External factors such as market environment and conditions, the competitive landscape, regulatory requirements, and entry barriers, as well as internal factors including risk tolerance, financial objectives, and availability of appropriate cash, people and capabilities, all can greatly influence where, when and how companies execute deals. Consider a hypothetical example of a pure air cargo company, which would like to expand into end-to-end logistics solutionsi.e., offering full origin-todestination services: pick up and delivery, pre-/defeeding and associated document management complementing pure air cargo transport. Doing so would change the companys product offerings, and also could affect its geographical reach and target customer base. Thus, a company must understand what is most important given its corporate strategy and where it wants to grow in the futurefor instance, to evolve into a provider of end-to-end logistics solutions, become more of an international player instead of a regional operator or extend its reach into industry verticals it already serves or add a new vertical to its mix. Having answered the question on where to grow, the company then can understand and evaluate how it wants achieve this growth. This involves a thorough evaluation of the different organic and inorganic deployment options that could help it close strategic gaps. Companies should map out buildpartner-buy options for each gap along the four directives, as well as respective advantages and disadvantages, to
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determine whether gaps are best closed by internal or external means. The most important decision criteria are required speed and investment, risk and certainty of outcome, ability to execute and effect on balance sheet. Consider the previously mentioned example: If the air cargo company decided that it wanted to evolve into a provider of end-to-end logistics solutions for global clients, the build-partner-buy analysis might conclude the company should use M&A to acquire the necessary assets, technology, expertise and other capabilities. The company could do this organically; however, creating a global capability from scratch, even when limiting the scope to major trade lanes, would be extremely time consuming and costly and fraught with potential risk. Conversely, if the company was looking for a less-expensive solution, such as an end-to-end logistics solution for one vertical on one or two trade lanes, an organic option might turn out to be the preferred avenue for the company due to its economic and operational feasibility and lower invest requirements.

Building Robust M&A Capabilities Is Critical to Execution

Once it has developed its M&A strategy, a company should confirm it has the right capabilities in place to effectively execute the strategy. Accenture has identified three main drivers of M&A success: value-driven target screening, thorough due diligence and effective merger integration.
Target screening Accenture has found that a value-driven rather than purely financial approach for identifying and screening acquisition targets or merger partners delivers the best results. This approach includes screening criteria that are directly linked to M&A strategy to assess whether the deal will fill strategic gaps, as well as frameworks to identify and quantify the expected value from an acquisition or merger. Using such an approach, a company can evaluate and prioritize candidates based on their strategic rationale, synergistic value and the likelihood of getting the deal done. Due diligence A key activity in any M&A deal is the due diligence. A focused yet thorough due diligence is vital in helping companies understand what they are buyingand in creating the right strategies to obtain the desired value from the deal. A company should follow a holistic approach to strategic and operational due diligence, one that focuses not only on validating acquisition assumptions, but also on providing greater insights that enable it to proceed confidently with subsequent integration activities. The approach should enable the company to identify and estimate the impact of synergies as well as uncover potential destroyers of synergies and other risks. Merger integration While choosing the right acquisition targets and quickly identifying sources of value are critical, effectively integrating these acquisitions into the enterprise may be the single most important M&A success factor. In our extensive work with clients around the world, Accenture has
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found several factors are key to merger integration success. Jump-starting integration activities. Successful acquirers often begin work well before deal announcement, preparing their integration program structure, establishing integration teams with welldefined charters and scopes, and planning for day one of the merger and beyond. Focusing on value creation, not just integration. Seasoned acquirers also focus on the areas that will create the most value, structuring the integration program around those key value drivers and ensuring each receives adequate focus and resources. Additionally, they emphasize the customer throughout the integration process, and are particularly mindful of retaining key customers. Addressing potential cultural issues early. Savvy acquirers gain an understanding of any potential cultural issues by developing blueprints of the merging organizations, and then tailoring the integration and communications programs to mitigate and address key differences and potential clashes. Ensuring comprehensive, frequent and consistent communications. A company should develop a detailed, integrated communications plan for each key stakeholder group and implement it immediately after the merger announcement. Providing strong governance and tight process controls. The most successful mergers are characterized by a strong, centralized program management function that coordinates decentralized

teams and provides common tools and processes, risk management oversight and management reporting to keep executive teams up to date on progress while allowing the line organization to continue to focus on the day-to-day business. Maximizing synergy opportunities. A company should capitalize fully on synergy opportunities by tying all potential synergies to specific execution plans. However, because time and capacity for change are not unlimited, it should focus on an 80 percent level of certainty and comfort in planning and then drive quickly for 100 percent execution. Moving quickly to implement bold changes. Because mergers create the expectation of change among employees, management teams can be bolder about the type and size of changes they make to operating models, portfolio, channels and other aspects of the business. But they must work fast, as the window for such change typically is only 18 to 24 months. The preceding M&A capabilities are especially critical in the F&L industry. In Accentures experience, some F&L companies truly understand that M&A does not create value per se, but rather, that value is generated by how well thought-out deals are and how well they are executed and integrated. These firms are able to realize the expected synergies from their transactions and accompanying increases in shareholder value. Those that fail to execute and integrate deals will end up with significant cost and headcount redundancies and acquisitions that do not help them fulfill their obligations to investors.

Conclusion
With growth on the executive agenda at most companies around the world, F&L companies face a considerable challenge: identifying how and where to capture growth to satisfy investors expectations. They could move into new markets or segments, choose to serve a new customer base, decide to augment their product or service portfolio, or expand into new geographies. All of these actions are potentially viable, and could help F&L companies gain access to new revenuegenerating white spaces that would complement their existing core markets and offerings. In many cases, though, organically making these moves would be impractical. Building the necessary assets, technology, expertise and other capabilities to, for instance, expand into a fast-growing emerging market or evolve from a air carrier to an end-to-end supply chain solution provider would be too time consuming, costly and risky for the vast majority of F&L companies. Furthermore, JVs and alliances, with their oftencomplicated relationships and issues relating to control, are no longer the sole route into core emerging markets due to the willingness of governments in those countries to increasingly accept foreign ownership of local companies. That is why we expect M&A to become an increasingly important component of F&L companies growth agenda. With sufficient cash on hand, F&L companies are in a favorable position to strategically acquire what they need to quickly build a profitable business in a new market, customer segment or geography. The key to success in this endeavor is having a robust M&A strategy that clearly articulates how M&A supports the companys overall corporate strategy, as well as the capabilities necessary to execute M&A deals in a way that minimizes risk and maximizes speed and returns. Without both of these elements, a F&L company is at risk of, at best, not fully capitalizing on the growth opportunities before it and, at worst, being left behind as more able competitors make their moves.

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End Notes
1) The freight and logistics industry comprises firms engaged in the supply of services relating to the movement, storage and handling of freight. According to Accentures definition, it contains the segments freight transportation (air, ocean, rail and road), mail and express, and freight forwarding and contract logistics. 2) Our analysis is based on Thomson Reuters M&A data. The dataset includes all transactions greater than US $100 million, announced and completed between January 1, 2002, and March 31, 2012 (Q1). To derive this F&L-focused M&A dataset, we have created a subsample by manually categorizing all acquirers and targets into F&L segments based on case-by-case analysis of companies profiles. In cases where companies are active in more than one segment, the primary segment, i.e. the one with the highest proportionate revenue share, is decisive. Equity carve-outs, exchange offer and open-market repurchases are excluded. Deal value excluding net debt of target. Data was retrieved December 21, 2011, and April 16, 2012. 3) Domestic deals are deals in which acquirer and target are located in the same country. Cross-country deals are deals in which acquirer and target are located in different countries. 4) Analysis includes all deals in which the acquirer is an F&L company. 5) Intra sub-segment deals are deals in which acquirer and target operate within the same sub-segment, e.g. freight forwarder acquirers another freight forwarder. Intra segment deals are deals in which acquirer and target operate within the same segment, e.g. freight: ocean carrier acquires rail cargo carrier. Intra industry deals are deals in which acquirer and target are both F&L companies, e.g. freight forwarder acquires trucking company. Cross industry deals are deals in which the acquirer is a F&L company and the target is active in another industry. 6 )Business similarity measures how similar the targets and the acquirers businesses are. HIGH= intra sub-segment deal; MEDIUM - HIGH = intra segment deal; MEDIUM = intra industry deal; LOW = Cross industry deal. Geographic proximity measures the geographic proximity between acquirer and target. HIGH = Domestic deal; MEDIUM = deal in which acquirer and target are located in the same geographical region, e.g. Europe; LOW = deal in which acquirer and target are located in different geographical regions, e.g. North American acquirer and European target. All values are arithmetic means.

This document is produced by consultants at Accenture as general guidance. It is not intended to provide specific advice on your circumstances. If you require advice or further details on any matters referred to, please contact your Accenture representative.

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About the Authors

Mirko Dier is an executive partner and leads Accentures Global M&A practice. Mr Dier joined Accenture in 1995 and works with leading clients particularly in the Resources industry with a focus on corporate strategy, M&A, merger integration and business transformation. He holds a masters degree in business administration and an executive master of business administration degree from Kellogg. He is based in Munich. mirko.dier@accenture.com Dr. Sarah Ali is a Munich-based senior consultant in Accentures Global M&A practice with several years of international consulting experience. During her career she has worked on several M&A, joint venture and alliance engagements. Her industry focus is freight & logistics. She holds a diploma degree in business administration as well as a Ph.D. in finance. sarah.ali@accenture.com Jrg Junghanns is a senior manager based in Germany and an executive member in Accentures Freight & Logistics core team. In the past ten years, he has worked on international assignments with transportation and logistics companies, primarily around strategy and process execution. Mr. Junghanns holds a diploma degree in international business management. joerg.junghanns@accenture.com The authors would like to thank Adriana Diener, Rob Knigge, Brooks Bentz, Seb Hoyle and Kathrin Graser for their contributions to this article.

Michael Sturm is an executive partner and leads Accentures management consulting business for Air, Freight & Logistics and Travel. Mr. Sturm joined Accenture in 1996 and works with leading clients in travel and transportation. He holds a masters degree in business administration. He is based in Munich. michael.sturm@accenture.com

About Accenture
Accenture is a global management consulting, technology services and outsourcing company, with more than 249,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the worlds most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$25.5 billion for the fiscal year ended Aug. 31, 2011. Its home page is www.accenture.com.

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