European freight forwarders focus on cost-cutting rather than M&A

After the closing of freight forwarding’s ‘sale of the century’ earlier this year, with Germany’s Schenker being sold to DSV, there was speculation that further consolidation could follow, with the Danish giant’s rivals spurred into action to counter the potential impact of the mega buy.

However, some of the major players in the sector would appear to have more immediate concerns than contemplating M&A [Merger & Acquisition].

Soft Demand, Falling Rates, and Job Losses

US tariff policy and the accompanying trade war it has threatened to trigger, in many parts of the world, notably China, has been a key factor in the market environment becoming increasingly challenging.

Softer demand for ocean and air freight has sent rates tumbling, weighing on the bottom line. Attention is now focused on cost-cutting measures, including job redundancies.

DSV's M&A record shows that its large acquisitions are often followed by significant job losses. In the case of its merger with Schenker, the expectation was that between 10,000-13,000 posts would be axed, the equivalent of 6-8% of the workforce.

“There are processes in the Schenker system that are very, very cumbersome, which we can streamline much better,” commented DSV CEO Jens Lund.

However, there is now speculation that, with the downturn factored in, the percentage could rise to 10%.

‘Tightening Up’ and ‘Hiring Freezes’

Meanwhile, Kuehne + Nagel (K+N) is making a cost-saving push in the US announcing a strategic realignment in its forwarding organizational structure.

“These changes, which are effective immediately, are designed to enhance our ability to serve customers, streamline decision-making, simplify internal operations, and unlock new opportunities for growth and career development across our teams – which we believe will drive enhanced long-term business growth across our core operations,” an internal document read.

K+N is estimated to employ around 11,000-13,000 people in the US.

Sources monitoring US forwarders, such as CH Robinson and Expeditors, reveal that they are “very cautious” about investing in staff: the former cutting costs “on a continuous basis”; the latter “tightening up, too”.

Other reports refer to “many global logistics services providers announcing hiring freezes” and that “everyone is nervous about the second half of the year.”

Review of Organizational Structure

DHL is also mulling the reduction in staffing levels with its group-wide ‘Fit for Growth’ program, making provision for personnel changes at individual locations (in all divisions) in order to become more efficient overall and achieve growth targets.

Denmark’s Scan Global Logistics (SGL) is embarking on a cost-cutting exercise too, which will entail a review of whether its organizational structure is up to date.

The company has been on a fast-track growth curve in recent years, making a series of acquisitions and expanding into new geographical regions. reflected in its rising headcount, which in H1 ‘25 increased 26% compared with the same period last year.

In an interview with Danish media, CEO Allan Melgaard said, “I am looking at a market that is quite unpredictable, and that is why we are taking these measures.”

On the likelihood of job cuts, Melgaard noted: “I don’t want to put a figure on it, but we are looking at the cost base, and we believe there is potential for savings in various areas. We should not have many fewer (staff) than we have today, because we actually have a high level of activity, but there is pressure on margins.”

Putting all of these developments together, one could well concur with another market source who said: “The message is unequivocal: in freight forwarding, the time to invest in people after the COVID binge has long gone.”

Focus on Organic Growth

Returning to the consolidation in freight forwarding and the DSV-Schenker merger, in a recent interview with Danish media, K+N CEO Stefan Paul ruled out the prospect of it riposting with a large acquisition of its own, underlining it was not in the Switzerland-based group’s DNA.

“It’s not what we’re good at. And that’s something you have to consider: What are you good at? You shouldn’t think that you’ll become better by copying others. It’s always good to stick to what you’re good at. We are conservative and absolutely focused on organic growth.”

He continued: “Some investors really like the consolidation story. I think the narrative of organic growth with bolt-on acquisitions takes a little longer to resonate.”

According to Paul, large acquisitions pose many challenges that can often play into the hands of competitors.

“First of all, you will always lose business,” he said – a result of certain customers being reluctant to put too much business into the hands of a single company, preferring to employ several providers. “My view is that 20% of the top line will be at risk.”

DSV’s acquisition of Panalpina in 2019, for example, led to direct benefits for Kuehne + Nagel. “We have gained so much from it. And now we will get our share of this consolidation (DSV’s acquisition of Schenker).”

Paul added, “If we can maintain our position as number one or two from a volume perspective and at the same time gain so much additional volume and customers from other companies’ mergers, why should we do anything else? If that changes, we’ll have to see how it goes. But right now, there’s no need for it.”