In a recent interview with Opto, GXO’s chief strategy officer Neil Shelton explained why the acquisition of Clipper Logistics will benefit the company by allowing it to expand into new sectors and markets, as well as improve its supply chain management expertise.
Neil Shelton, chief strategy officer, said the deal would allow the company to take further advantage of the growth in ecommerce, electronic fulfilment and direct-to-consumer services in Europe and around the world. “This is a super-exciting acquisition which will enhance our growth,” Shelton told Opto. “Clipper was top of our list of potential acquisitions. It is a company we have admired for some time.”
Clipper, a specialist in ecommerce logistics, has seen its revenue grow 40% year-over-year to £696m in the year to April and has partnerships with clients such as Asos [ASC.L] and Marks & Spencer [MKS.L].
The deal is still pending competition reviews but is expected to be completed this summer.
Valuation of GXO's acquisition of Clipper Logistics
GXO set to benefit from Clipper’s logistics expertise
The acquisition, which Clipper’s shareholders voted overwhelmingly in favour of last month, will also help GXO meet rising demand from its global partners for more efficient warehouse operations and dependable supply chains.
Shelton said one of the main benefits from the deal would be the introduction of new services for GXO, which operates in 28 countries, operates 900 warehouse locations and boasts blue-chip customers such as BT [BT-A.L], Currys [CURY.L] and Apple [AAPL].
“Clipper is absolutely next level in repairs and reverse logistics,” Shelton explained. He was referring to Clipper’s Servicecare offering, which specialises in B2B consumer electronic returns, and its B2C services segment RepairTech.
“In this world of ecommerce where an awful lot of stuff gets returned, Clipper offers solutions to both consumer electronics firms and customers. It helps their margins, customer service and their environmental goals as at present 25% of consumers electronics goes to landfill,” Shelton said. “Clipper has largely built its business in the UK and the Netherlands so the chance to offer these services to our existing tech and telco customers around the world is really exciting.”
Clippers’ regional footholds and life sciences service
Alongside its logistics expertise, GXO will benefit from Clipper’s exposure to sectors and markets that it can tap into.
Shelton likened the Clipper acquisition to GXO’s recent purchase of Kuehne + Nagel’s UK contract logistics operations. “They had a strong presence in tech and telcos and food services. They had the expertise and solutions and we have grown these businesses sharply with some fantastic contract wins. This is the opportunity Clipper brings us,” he said.
Another attraction for GXO is Clipper’s presence in Germany, which Shelton describes as Europe’s largest warehousing market. “We have a relatively light footprint in Germany so together with Clipper, it will bring us critical mass in that market. Our big global brand customers also see Germany as a critical market for them,” he explained.
Shelton is also excited about the potential of Clipper’s Life Sciences service, which includes Wippet, its B2B online marketplace for the healthcare sector.
“Historically you have always needed a licence to operate in [the healthcare] sector. Clipper has a number of these and strong relationships which we will be looking to expand out across a number of regions,” he said. “There is a huge boom in life sciences and pharmaceutical services like e-prescriptions and direct to consumer. It plays into our heartlands and strengths of high velocity warehousing solutions and enormous precision.”
Shelton also recently told Reuters he sees opportunities in the food sector, where GXO already works with French supermarket Carrefour. “New technologies will give the business a further boost,” Shelton said. “Robots can speed up and improve the handling of food.”
Shelton is optimistic of further expansion for GXO
Although the ecommerce boom seen at the start of the coronavirus pandemic has since slowed down as brick-and-mortar stores reopened and rising inflation caused many consumers to curb their spending, Shelton is still confident there is a “fertile environment” for growth.
In its recent first-quarter results released on 4 May, GXO reported organic revenue growth of 19%, matching the growth seen in the previous three months. This marked the fifth consecutive quarter that the company has recorded double-digit revenue growth.
“Our new customer wins are strong, and our forward sales pipeline is at record levels,” Shelton said. “There are some concerns around quarterly oscillations out of the pandemic as stores re-open, but our customers are planning for further growth in ecommerce and direct to consumer. The online share will continue to grow.”
“There are some concerns around quarterly oscillations out of the pandemic as stores re-open, but our customers are planning for further growth in ecommerce and direct to consumer. The online share will continue to grow” - Neil Shelton
The Clipper acquisition and GXO’s vast ecommerce and fulfilment potential is very much the focus at present, but Shelton says more mergers and acquisitions could be on the cards. “We are always on the lookout for really high-quality great businesses that are a cultural fit for us,” he said. “We will be looking in the future at more M&A bolt-on type activities. We want to expand our global footprint.”
Disclaimer Past performance is not a reliable indicator of future results.
CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.
*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.