UPS forging stronger links in the UK
Express giant UPS has signed an agreement to acquire UK parcel carrier Lynx Express. This move should not only help strengthen the US company’s capabilities in one of the most dynamic and fragmented parcel markets in Europe, but could signal a move towards further consolidation within the UK market.
UPS disclosed that it would acquire Lynx Express for USD96.5 million and expects to complete the transaction in the second half of 2005. UPS CEO Mike Eskew implied in an interview that the Lynx Express brand may be folded into UPS. This would not be surprising as UPS’s business model is based on rolling out a standard proposition in every country it has a presence in, albeit with some regional differences, giving its operations a strong and globally recognized brand.
Lynx Express is one the UK’s largest independent parcel delivery companies, with an estimated 3.4percent market share of the UK express and courier sector. The company is majority owned by the private equity firm Bridgepoint Capital and, in addition to its parcel delivery service, it also offers contract logistics and spare parts logistics services.
The acquisition represents an ambitious move by UPS to increase its presence in the UK and, to a larger extent, in Europe, which is primarily DHL and TNT’s territory. Although UPS has a strong presence in the UK, the country is one of the most (if not the most) fragmented parcel markets in western Europe, with some 20 established local carriers competing for market share. However, the deal could signal the catalyst for the consolidation of the market, with a handful of large operators increasing market control. While Royal Mail and its parcel subsidiary Parcelforce still have a privileged position in the UK, foreign rivals such as DHL, TNT [TPG.AS] and La Poste have gained market share significantly over the past few years.
The acquisition also underlines UPS’s international focus, as the company has become increasingly reliant on non-US revenues to drive overall growth. Indeed, as the recently published Q2 2005 figures show, while international package revenues are experiencing double-digit growth, UPS’s US package revenue growth is more modest. UPS must now focus on strengthening its existing presence in the domestic delivery segment in Europe, and the Lynx deal is a further useful step in this direction.
