UPS acquires Freightex in move geared to expand European over-the-road freight brokerage presence

In a move geared towards expanding its truckload brokerage operations in the United Kingdom and Europe, global transportation and logistics bellwether UPS announced earlier today it has acquired U.K.-based Freightex, a provider of truckload, less-than-truckload (LTL), specialized, and refrigerated over-the-road services.

Financial terms of the deal, which was completed on January 3, were not disclosed.

UPS officials said that this acquisition helps to immediately establish the company’s presence in the growing U.K. and European third-partly logistics (3PL) over-the-road brokerage transportation market, while also establishing a new global and regional company growth platform from an established base of carriers and customers. And it added that there are now more than 500,000 carriers operating in Europe. Freightex has eight locations in Europe and the U.S., leveraging an asset-light model designed to match its customers’ outbound shipments with available capacity through its carrier network.

UPS has been methodically building up its over-the-road brokerage presence, with the company acquiring Chicago-based Coyote Logistics in August 2015 for nearly $2 billion. It said that Coyote’s and Freightex’ business models are complimentary and that they will share the best system technologies, business practices, and leverage customers and carriers across the units.

“The U.K. and Europe are strategic 3PL freight brokerage growth markets for UPS and there is significant cross border opportunity,” said Alan Gershenhorn, UPS Chief Commercial Officer.  “This acquisition provides UPS customers an immediate, knowledgeable and competitive U.K. and European presence.  We intend to align Freightex with Coyote for greater efficiency and continue to invest for further growth.”

What's more, citing data from Grand View Research, UPS noted the European 3PL market was forecasted to hit $174 billion by the end of 2016, with the freight brokerage portion of the U.K. and total European 3PL market growing at a faster rate than the total market and expected to further expand with more shippers and carriers adopting the brokerage model.

UPS Vice President of Public Relations Steve Gaut told LM that UPS believes there is a significant market opportunity in the U.K. and Europe to expand the truckload freight brokerage business, explaining that this opportunity was identified by the leadership team at Coyote in advance of UPS’s acquisition of the business in 2015. 

“Following the acquisition, UPS evaluated the best approach and best timing to expand the Coyote-type brokerage model using its existing technology platform and business processes,” he said. “Organic and acquisition approaches were evaluated. Ultimately the Freightex acquisition provides a great catalyst to expand the business, more efficiently than building internally, since we are acquiring existing customer and carrier networks and extensive employee knowledge about EU transport requirements.”

In terms of what this acquisition will mean for UPS customers, Gaut said that upon integration UPS customers should actually be defined as: existing UPS customers, existing Freightex customers and existing North American Coyote customers. 

“This acquisition helps existing UPS and Coyote customers with access to a pan-European brokerage solution for their shipping and backhaul needs as part of our multi-modal network of transportation options,” he said. “That means we will be in a better position to offer a competitive shipping that may include some air, some ground, some brokered ground…so we are adding another option to help customers.  In turn, existing Freightex customers will also benefit from the breadth of UPS shipping products and integration with Coyote brokered transportation offerings in the North American markets.  Freightex will also access Coyote’s suite of technologies for matching outgoing loads with available carriers and for customer reporting to problem solve for greater efficiencies.   Existing Freightex customers and carriers may also be able to take advantage of these solutions in the future as deeper integration occurs.”

When asked what the main competitive advantages of this deal are for UPS, Gaut cited access to the U.K. and EU brokered truckload freight market by utilizing a proven player with an existing knowledgeable employee base serving an existing customer and carrier network. He also noted that the Coyote and Freightex business models will integrate well and UPS can expand from this base much more efficiently that building organically.

Upon completion of the deal on January 3, UPS began explaining the transaction and plans to employees last week and is in the process of communicating with existing Freightex and UPS customers and carriers and kicked off the sharing and learning process necessary to bring about integration with Coyote. Gaut said UPS is confident this will move quickly. 

“We are excited to join the UPS organization and Coyote brokerage operations,” said Tim Phillips, Freightex’ Chief Executive Officer,” in a statement. “UPS and Coyote have industry-leading technology, a no-excuses customer service culture, and a proven record of success.  We will improve our efficiency through Coyote’s technology and use of the UPS network, while continuing to out-service the competition and provide results that customers count on us to deliver.” Phillips will continue to lead the Freightex business, which will operate as a wholly-owned subsidiary of UPS.

Dick Armstrong, chairman of supply chain consultancy Armstrong and Associated said this acquisition certainly makes UPS a stronger competitor in Europe against DHL, FedEx/TNT, K&N and DB Schenker.

"About 30 percent of the truck traffic in Europe is done with Polish owner-operators," he said. "UPS will expand from the Freightex base increasing competition. We can expect more consolidation in the European freight market going forward."