The delivery service industry includes mail and package deliveries for commercial and consumer use by road, air and ship. This report will concentrate on the package and express delivery industry, since the conventional postal and letter business is declining and mostly operated by state-‐owned companies, which are hard to compare with private-‐owned companies.
Four large companies, FedEx, UPS, DHL and TNT, dominate the market in Europe and the United States. TNT is the smallest among those four. However, TNT is the market leader in two major European markets, UK and Italy. The market in the United States is highly dominated by FedEx and UPS, which almost create a duopoly. The largest player in Europe is DHL, which has 32% of the German market. Furthermore, DHL has around 40% in the Asian market and over 50% in overall central Europe, the Middle East and Africa (Economis, 2015 April 10). Therefore, this report will examine these four companies to generate an overall picture of the delivery service industry. The following SWOT analyses will give a general overview of the strengths, weaknesses, opportunities and threats of the industry.
Strengths:
- Record Growth: Due to structural changes in the transport routes and order quantities in the freight industry, the package and express delivery service are growing much faster than the total freight market.
- Dynamic and sustainable growth of the industry is decreasingly susceptible to economic changes, due to the integration of their services in the everyday live. More and more everyday goods like food and cloth are ordered online and get delivered to the customers’ home.
- Increase of Efficiency: the transport of goods is getting faster and less costly due to highly efficient infrastructure.
Weaknesses
- Capacity constraints especially in peak phases: demographic changes resulting in lack of both highly qualified personnel as well as in the field of low-‐skilled workers.
- High dependency on major customers: The proportion of sales from major B2B customers is up to 90% for most companies.
Opportunities
- Volume increase in parcels: In particular parcel delivery to private consumer is driven by the strong increase in online trading. The proportion of returns is steadily increasing.
- Speed is becoming an increasingly important factor in the transport sector. In addition to the online trading of non-‐food products, also food is becoming more and more important.
- Just-in-time production
Table of Contents
Introduction
Mergers and Acquisitions
Dividend Policies
Ownership and Capital Structure
Interrelationships
Research Objective and Core Topics
This report aims to analyze the strategic financial management practices of four major players in the delivery service industry—FedEx, UPS, DHL, and TNT—by examining their M&A activities, dividend policies, and ownership structures to understand how these elements correlate with market performance and corporate strategy.
- Analysis of external growth strategies through horizontal and vertical mergers and acquisitions.
- Evaluation of dividend payout policies and their consistency during financial crises.
- Investigation into ownership structures and the influence of institutional investors.
- Examination of capital structures and the role of debt-equity financing.
- Identification of interrelationships between M&A activities, dividend payouts, and corporate ownership.
Excerpt from the Book
Mergers and Acquisitions
A general definition of the term pair "Mergers and Acquisitions" or the abbreviation "M&A" does not exist. In some cases, each individual term "mergers" and "acquisitions" is used as a synonym and in overlap with related terms (Glaum et al., 2010). According to Reed (1999) "Mergers and Acquisitions" is used as the generic name of any company mergers in general, without a precise definition. Basically the term M&A stands for the combination of previously economically and legally independent companies, in which the autonomy by at least one of the involved parties is limited or even completely abandoned after the M&A process is finalized. According to the scientific literature, the main reason for M&A is growth. In this context, the term of growth is not limited to a company’s “size”, it also includes growth in the sense of new products, markets and/or technology. In general, a company can grow in two ways, either internally, for example by establishing new plants, employing new workers, developing new products etc. or it can grow externally. External growth usually involves mergers and/or acquisition of other companies, or parts of other companies (Pausenberger, 1989). External growth can therefore be divided into horizontal, vertical and conglomerate growth. Horizontal growth means, M&A activities are conducted within the same stage of production within the same industry. For example acquiring a competitor, which offers the same or similar service or product. Vertical growth on the other hand means acquiring a company within the same business, however at a different stage of production/service. For example, acquiring a supplier or customer of the company’s services. A conglomerate M&A describes the growth into a new business line, often used in the light of diversification of the current business concept (Reed et al., 1999).
Summary of Chapters
Introduction: This chapter provides an overview of the delivery service industry, identifying key market players and outlining the SWOT analysis framework for the report.
Mergers and Acquisitions: This section defines M&A concepts and examines the strategic rationales behind recent acquisitions made by FedEx, UPS, DHL, and TNT.
Dividend Policies: This chapter analyzes the dividend payout strategies of the major delivery companies, concluding that most follow a smoothed residual dividend policy.
Ownership and Capital Structure: This section investigates the institutional ownership profiles and the debt-equity compositions of the studied corporations.
Interrelationships: This final chapter synthesizes the correlations between ownership, capital structure, and dividend payments, highlighting how these factors influence corporate target attractiveness.
Keywords
Mergers and Acquisitions, M&A, Delivery Industry, Strategic Financial Management, Dividend Policy, Smoothed Residual Dividend, Capital Structure, Equity Financing, Debt Financing, Ownership Structure, Institutional Investors, Corporate Growth, Horizontal Growth, Vertical Growth, Agency Theory
Frequently Asked Questions
What is the primary focus of this research report?
The report focuses on the strategic financial management of the four leading global delivery companies: FedEx, UPS, DHL, and TNT.
What are the central thematic areas covered in this document?
The core themes include corporate merger and acquisition strategies, dividend payout policies, and the analysis of ownership and capital structures within the logistics sector.
What is the main objective of the analysis?
The primary goal is to generate an overall picture of the delivery industry's financial behavior, specifically identifying how these companies manage growth, shareholder returns, and capital financing.
Which scientific methods are utilized?
The study employs a comparative analysis of corporate data (annual reports and financial data) combined with established financial theories, such as those by Lintner, Gordon, and Modigliani-Miller.
What does the main body of the work address?
The main body systematically examines the specific M&A patterns of each of the four companies, evaluates their historical dividend payouts relative to earnings, and explores the impact of institutional shareholding on corporate governance.
How would you characterize the work using keywords?
The work is best characterized by terms like M&A strategy, Dividend Policy, Capital Structure, and the delivery service industry.
Why did the European Union block the merger attempt between UPS and TNT?
The EU intervened due to regulatory concerns regarding the potential reduction of competition in the express delivery market, which could have led to price increases.
How does the dividend policy of TNT differ from its competitors?
Unlike FedEx, UPS, and DHL, TNT did not pay dividends for several years following its demerger, likely to remain an attractive and lean acquisition target.
What is the relationship between ownership structure and corporate performance mentioned in the text?
Drawing on Leech and Leahy (1991), the text suggests that wide ownership diversification without a single controlling investor tends to result in higher corporate performance through profit maximization.
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- Arthur Ritter (Autor:in), 2015, Delivery Services. An Industry Report about the Corporate Finance Practices, München, GRIN Verlag, https://www.grin.com/document/299130
