Wall Street is buzzing and XPO Logistics shares have risen sharply amid rumors of a buyout by Home Depot. XPO Logistics is a top ten global provider of cutting edge supply chain solutions to the most successful companies in the world. The company operates as a highly integrated network of people, technology, and physical assets. They use their network to help customers manage their goods more efficiently throughout their supply chains. As of the end of 2016, XPO served more than 50,000 customers and operated with over 87,000 employees and 1,425 locations in 34 countries.
Home Depot’s Likely Strategy
Major retail shippers are strategizing on plans to ensure final mile delivery of the burgeoning e-commerce market. The best e-commerce platform out there is seriously devalued if they cannot get their packages delivered reliably. It’s unclear, at this point, whether this acquisition is critical to Home Depot 's operation, or if they are simply making this move to beat Amazon to the punch. It may also be a move to diversify Home Depot’s operations. Benjamin Gordon, founder of BG Strategic Advisors, a Palm Beach, Florida based transport and logistics mergers and acquisitions firm, said the rumor of a Home Depot-XPO affiliation is credible because every major retailer is looking at different strategies to compete with Amazon and to get ahead of the omni-channel fulfillment trend spawned by e-commerce's explosive growth. "Home Depot, like every retailer, is trying to figure out a competitive strategy," Gordon said in an email. "In all cases, it is vital to address the question of how to ensure a successful last-mile solution." Besides avoiding potential ownership of XPO by Amazon.com, which could potentially result in service deterioration for Home Depot, the company will use the expertise of the famous last-mile delivery to optimize its business, especially for heavy items, something which Home Depot sells a lot of.
What to Expect
Most transportation indices have been suggesting a tighter equipment market for both LTL and Truckload carriers. Also, there is little evidence of any major new carriers entering the market. These two trends will certainly translate to increased pricing. All of these factors would support the buyout of XPO Logistics. If a deal would take place, it would lock in huge gains for investors in XPO, which has benefited from a string of deals that have been integrated rather well. XPO has grown rapidly with the 2015 purchase of Con-way and Norbert Dentressangle for a combined $5 billion, while the company has made many other bolt-on deals as well. In that sense, it is fair to say that the company is a product of acquisitions as sales have grown from merely $50 million a decade ago to $15 billion on a trailing basis. If a deal goes through, investors in XPO will make 100 times their money in just a 10-year time span. There is always the possibility of a bidding war between Amazon and Home Depot for control of XPO.
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