The logistics sector is consolidating. Think DSV and Schenker, InPost and Yodel, GXO and Wincanton, CEVA and Bolloré. And, at time of writing A.P Moller has announced an agreement to acquire a majority stake in Globex.

While deal frequencies are slowing average transaction values are rising and in boardrooms across the sector, the same question will be asked: how do we make this work?

The strategic drivers for this M&A activity are clear. Scale. End-to-end resilience. Network density. New markets. Cost savings. And in theory, two businesses combining should produce something more valuable than the sum of their parts.

The reality of integration is that it can be one of the most operationally and financially complex journeys a logistics business can undertake. Central to that complexity is a challenge that's often overlooked during M&A discussions: costing.

Two businesses, two cost structures, one problem

Every logistics business develops its own way of recording, allocating and reporting costs, its own approach to overhead allocation and its own methodology (or lack of one) for attributing indirect costs to customers, lanes and services.

To avoid operating with an incomplete cost picture post merger, these methodologies will need to be reconciled into a single, consistent framework.

Which depots are profitable and which are being carried by the rest of the network? Which customer contracts from the acquired business are worth retaining and which should be repriced or exited? Where are the real cost synergies? Without a common costing methodology applied consistently across both legacy businesses, these questions can't be answered with confidence.

The synergy illusion

Cost synergies are often cited in an M&A business case. The numbers look compelling in the model.

But realising those synergies requires knowing what costs actually exist in both businesses and where they are being driven. If the cost allocation methodology in the acquired business is inconsistent, incomplete or not comparable with the acquiring business's approach, the synergy model is built on assumptions rather than evidence.

The risk is not just that cost savings are harder than expected to deliver. If rationalisation decisions are made on the basis of flawed cost data their consequences may only become visible months or years later. Perhaps a profitable depot closes because the data suggested it was loss-making. Or a customer portfolio is upended because blended margin data didn't reflect true cost-to-serve.

The PE pressure cooker

A significant proportion of mid-market 3PLs, CEP operators and freight forwarders are backed by private equity and PE ownership brings a specific set of financial expectations.

There's pressure to demonstrate margin growth, not just revenue growth. Limited hold periods. Exit valuations driven by EBITDA multiples that demand rigorous, defensible profitability analysis. In this environment, the ability to demonstrate granular, accurate cost and margin data down to customer, contract and service level is not just a nice-to-have. It's a core requirement of managing the business.

For PE-backed operators going through a merger or acquisition, the absence of a robust, consistent costing methodology is a direct risk to the investment plan.

Integration as an opportunity

There is a more optimistic way to frame the costing challenge of M&A. Integration is disruptive and demanding but it's also a time when a logistics business has both the mandate and the motivation to fundamentally improve the quality of its cost management.

Operators who use the integration process to implement genuine, shipment-level activity-based costing emerge from it with a capability they didn't have before. They can see the combined business more clearly than either legacy entity could see itself. They can make rationalisation decisions with confidence. They can demonstrate evidence based margin improvement to investors. And they can move forward with a cost management foundation that's fit for purpose.

The window is short

Post-merger integration moves fast. Decisions about networks, customers, people and infrastructure are made quickly, often before the full financial picture of the combined business is clear. In an industry where margins are tight and the cost of a wrong decision is high operators with a solid costing capability in place are the ones who make those decisions well.