Impact On Stock Price For Merging In An All-Stock Deal Company Profiles – DSV

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Company Profiles – DSV

DSV – A history of M & A.

The core of this company profile is centered on mergers and acquisitions. DSV acquired — some say it was to be a merger amongst equals — the Dutch Frans Maas group.

Mergers and acquisitions are activities that take place in a business environment, but the mechanisms can be translated to the organization; organizational department too are continuously merging.

Mergers are an answer to a changing business environment. As in this example. “the transport sector is subject to a continuous consolidation process driven by globalization and the consequent increase in cross-border trade…” This paragraph is from the risk section of the DSV annual report 2007 (1). DSV is an acronym meaning: the joint haulers.

“It all began in 1976 when Leif Tullberg and ten independent haulers established De Sammensluttede Vognmænd (DSV). The company operated as a cartage department for the owners and only handled contracting haulage and deliveries. In 2000 the biggest step in the company’s history was taken by the acquisition of DFDS Dan Transport Group… Since 2004 we have pursued the plan to strengthen our position in the European market. With the latest acquisition of Frans Maas in 2006, DSV goes from being a Scandinavian player to being a true Pan-European road transport and logistics player.” (2)

The ambitions are higher than this, the company wants to become one of the largest and most profitable transport companies in Europe. The business of mergers cannot be seen separately without the influence on organization: scale is one of the factors that determine the efficiency o fan organization.

Expansion is only possible by merging and acquisitions or by autonomous growth and in a consolidating sector, the last option is hard to achieve.

Interesting is the stock-quote feature on the site of DSV. Some companies build complete applications for the investor. In this case the company has chosen to source the stock-quote feature by the Nordic stock index where the stock is traded. It shows that the company is focusing on what it does best, and that is not making stock-quote applications. DIY is not part of that strategy. On the stock exchange we also learn that since May 2007 the stock has been split by one-to-ten.

Now about the acquisition that toke place in 2006. According to the annual report in 2007 – which is a protected pdf document – the company continue its effort to integrate the Frans Maas group. “This is a comprehensive and complicated process of commercial integration, realization of synergy potential and adjustment of legal and financial structures has now been completed in almost all countries, except for Germany and France…”

This process has evolved: “changes to traffic, termination of agency relationships, renegotiation of non-profitable agreements, combination of terminals and offices, consolidation of IT resources as well as staff adjustments.” (AR 2007)

The company’s business is organized by three separate divisions: Road, Air & Sea and Solutions. For this last, the group “disposes of 1,500,000 M2 of logistics facilities” (2)

The DSV’s Business concept is as follows: “… implies comprehensive outsourcing. DSV aims to produce a maximum of 5% of the revenue volume itself. The group uses haulers, airline companies and shipping companies as sub-contractors. As a result, DSV can quickly and cost-effectively adapt to changes in supply and demand in the transport market. The cooperation with sub-contractors is generally long-term and based on a atmosphere of mutual respect and requirements.”

The stock quote chart in the annual report show the new dilemma: increased growth and revenues (after the acquisition), but also a higher risk: the quarterly results fluctuate more than before the mayor acquisitions (f.e. of Frans Maas).

About Frans Maas.

In an interview in 2001 (3) Henk Benjamins — by that time chairman of the Frans Maas group — elaborated about the differences between transport and logistics. “There is a lot more behind the vehicles that one sees on the road… behind unfolds a logistical thinking and coordination what is the core of their business. The chairman said this in a context of a changing Image of the company.

Although Frans Maas is of Dutch origin the company can only survive as a trans-European player. Another misconception is that Frans Maas is a transporting company. “Frans Maas is an expedition and logistical servicing company, which is something completely different:

“A transporter has transport capacity and is searching for a cargo,” we nearly have no trucks, only a fleet of trailers. In the year 2001 the company had 175 locations with 80% of the turnover coming from outside the Netherlands. … our logistical service catalog is that divers that we can offer from international expedition to client specific logistics.”

This last business … comprises the organizing execution and reproduction of European flow of goods for ONE specific multinational client … this may be the whole scale of commodities, expedience, assemblies and end-products. These are large projects that are centrally organized, which is hardly possible otherwise.

International expedition is the gathering, exchange and distribution of smaller cargo from various clients for even so many destinations all over Europe. This, too, is a centralized organization.

Besides a centralized logistical process there are also decentralized logistics for “local clients.” Henk Benjamins explains in the interview that the pan-European role, the expedition network a key-driver is for the client specific logistics. “Often a new service is born at the expedition department. It all starts with doing something extra for one client which triggers other initiatives… At a certain moment the volume makes is possible to approach it broader and than it becomes logistics.

In this client specific logistics the logistical company changes from pure supplier to business partner; it takes care of a part of the business process of the outsourcing company.

“this is covered by long-term contracts.”

The change. “in march of 2006 a weak financial situation, cash flow problems and too low margins on transport combined with a low volume offers a reason to sell the company.” Although not all shareholders agree with this vision, M & A negotiations start.

By that time, Henk Benjamin is retired (in 2005) and in 2006 the new CEO – Arvid Manneke a Pharmacists from origin – negotiates with the Danish company DSV. Manneke received a position in the executive board of the new organization, but after a few month he resigns. According to the newspapers due to a conflict of interest with the CEO of DSV Kurt Larsen.

The company DSV will be re-branded and the name Frans Maas disappears. In the 2007 annual report there is no Dutch (top) manager left in the organization.

Kurt Larsen recently (the 16th of april) announced his resignation as CEO but will remain part of the supervisory board. Jens Bjorn Andersen becomes the new CEO.

(1) – http://www.dsv.com

(2) – Annual report 2007 on the same site

Hans Bool

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