In 2016, the $570 million equity infusion from Blackstone and New Mountain Capital in JDA Software made a lot of news. But since then, some much quieter investments have been noteworthy. The three most notable are Körber’s acquisition of HighJump, Castik Capital’s formation of the Alpega Group, and Temasek Holding’s investment in BluJay Solutions. All three of these supply chain software companies are benefiting from patient investors.
HighJump and Körber
I’ve previously written about HighJump and Körber. Chad Collins, the CEO of HighJump, explained the value of patient capital at the HighJump Elevate user conference. He said that HighJump has had several venture capitalists invest in them over the years. Typically, according to Mr. Collins, equity companies have a four to five-year investment horizon. That means these equity companies invest in growth in years one and two, but then seek to reduce the investments, harvest extra profits, and position the acquired company for sale in year four or five. Körber is a patient investor, the Körber investment makes it easier for invest in research and development.
The Alpega Group and Castik Capital
Castik Capital is another patient investor. They have an investment horizon of up to 10 years and only five to six investments per fund; this allows them “to utilize significant resources to support the portfolio company’s development.” The geographic focus of the fund is Western and Central Europe.
Alpega Group is the software company they created by combining the former Wolters Kluwer Transport Services and Austrian-based inet-logistics. The purchase of inet came first, in April of 2017; they provide SaaS-based transportation management systems in a network environment.
Then in June of 2017 they acquired Belgium-based Wolters Kluwer Transport Services, which included Transwide. The Transwide solution is used by shippers, logistics service providers and carriers to manage the end-to-end execution of shipments. It is a multitenant SaaS solution.
Finally, the Alpega Group acquired TenderEasy, a transportation procurement solution for securing long-term contracts with key carriers. This solution helps fill out the Group’s solutions end-to-end transportation process.
The acquisition prices were not announced, but Castik’s target equity investment is from €100-250m per deal for companies that in turn have a total valuation of between €300-1,000 million.
Their Castik website says that they look to invest in “privately held companies, with active participation from management.” That was certainly true in this case. The CEO’s of inet, Transwide, and TenderEasy are still in place.
Oswald Werle, the CEO at inet-logistics, explained to me that inet, Transwide, and TenderEasy will remain as separate brands. “The idea is not to bring inet and Transwide together in the near term,” Mr. Werle explained. “Nor are we planning on merging the platforms. The brands have different target customers.”
However, Transwide and inet are network solutions. “We do seek to build one carrier network consisting of the 50,000 transport companies” that operate across their brands. The group also operates load boards and freight exchanges, “We have the clear goal to harmonize all the carrier data we have.” This data will include lane quality and price information, as well as knowledge about the carrier – the lanes they run on, the type of equipment they operate, the insurance they carry, and so forth. “We will have one carrier network that is accessible to all our platforms.”
For Castik Capital, this was in part a digital play. The Alpega Group has load boards, where the parties to the transaction, depending on the site, can connect either digitally or by phone. But Mr. Werle explained, “we are starting the process of digitizing these freight exchanges. We want to go much more digital, including digital contracts.”
But this is not the Uber freight model, which Mr. Werle characterizes as an electronic brokerage model where the Uber platform sets the price and then makes margin based on the buy/sell transactions they facilitate. The Alpega Group wants to position themselves as a facilitator. “More an Airbnb approach, where the parties decide on the prices, but our platform is used to facilitate the business. The Transwide platform makes it easier to indicate that a truck will be available at a certain location on a given date. It is the carrier’s choice; with one click they can make the truck available and operate with less empty mileage.”
Temasek Holdings invested in BluJay Solutions. Last September, Temasek made a minority investment in BluJay that suggests a valuation for BluJay of approximately $700 million. Francisco Partners, a long-time investor in supply chain software companies, will continue to control the company.
Temasek is a state-owned holding company that can be characterized as a national wealth fund owned by the Government of Singapore. Talk about patient investors, when you manage a net portfolio of $275 billion, like Temasek does, you can’t jump in and of investments. And in the same time frame as this investment, BluJay announced a new financing facility that gives the company access to over $500 million of capital earmarked for further acquisitions. Clearly, Francisco Partners is also playing the long game.
BluJay is a strategic investor in assets that add value to the platform and ultimately its customers. First, Francisco Partners acquired Kewill Solutions in 2012; Kewill provided global trade management, parcel software, and other solutions. Then in 2016, Kewill acquired LeanLogistics. LeanLogistics was a provider of transportation management systems and managed transportation services. The combined company was renamed BluJay Solutions. BluJay then purchased Blackbay Ltd, a provider of mobility enabled solutions for the transport industry. Blackbay’s solutions deliver real-time track-and-trace, dispatching, and on-road routing and scheduling. BluJay is fairly well along in the process of building a common platform, based on a common interface and master data.
BluJay operates a logistics network. BluJay’s Global Trade Network has more than 40,000 carriers, shippers, forwarders, suppliers, and LSP participants. Doug Braun, the CEO of BluJay, told me that close to $50 billion is transacted over the platform annually (the number includes the value of goods declared to customs).
From the financial community’s perspective, companies like BluJay Solutions and the Alpega Group are interesting. Their network gives them the opportunity to create new types of value for their clients. The SaaS revenue model makes their revenues much more predictable and the companies substantially more recession proof. And, according to a new study by ARC, the global market for transportation management systems has had good organic growth; over the past five years the market has had a CAGR of approximately 10 percent.
Finally, the new round of investors represents patient capital; and this is very good for the customers of these software companies.
Source: Steve Banker at Logistics Viewpoints