Ben's Blog: Supply Chain M&A Trends and Related Topics
http://blog.bgsa.com
Benjamin Gordon
Managing Director...Syndicate
Ben's Blog: Supply Chain M&A Trends and Related Topics
Welcome to Ben's Blog! The Flat World, M&A, and the Global Supply Chain Today
Welcome!
To paraphrase Admiral Stockdale: why am I writing this blog, and why should you read it?
Historically, the M&A advisory business was a one-way process. Advisors sought out clients, and delivered their work. If you were a client, you would get a thick binder, go through a deal process, and have a transaction completed. If you were a warehousing company in Nashville, like Ozburn Logistics, you might merge with a warehousing company in another southeast marketplace.
Today, it's not so simple. We live in a decentralized and multi-dimensional world. It is more important than ever before for advisors to pay attention to the broader marketplace, and incorporate input from many different channels. The right buyer for a freight forwarding company in Minnesota might be another forwarder. Or it could be a warehousing business in Philadelphia. Or a private equity firm in New York. Or a global steamship company in Israel. This turned out to be the case for Interlog, a small freight forwarder which teamed up with Zim Logistics Network to become part of a global giant.
In short, the world has changed. Thomas Friedman had it right: we are living in a "flat world" economy.
Consequently, to be an effective advisor, today you have to see the entire field. In today's "flat world," a 360 degree field of vision is a prerequisite to successful deal-making. At BG Strategic Advisors (BGSA), we are constantly finding new buyers who are exploring the logistics and supply chain market. As the market continues to evolve, we see more and more "out-of-the-box" entrants seeking to gain access, ranging from overseas companies to manufacturing firms to private equity investors to others. Deals like PWC-GeoLogistics, Interlog-ZLN, Air-Road-Reliant Equity, CR England-Dynalink, and others are all examples of non-traditional combinations of buyers and sellers. Hence, to be effective at mergers and acquisitions, we need to constantly refresh our ideas as the transportation, warehousing, freight forwarding, logistics, and supply chain markets continue to evolve.
I started this blog in order to explore a broad range of topics, to share learnings that we are finding in the marketplace, and to solicit feedback from a broad mix of inputs. We will consider ideas such as
To paraphrase Admiral Stockdale: why am I writing this blog, and why should you read it?
Historically, the M&A advisory business was a one-way process. Advisors sought out clients, and delivered their work. If you were a client, you would get a thick binder, go through a deal process, and have a transaction completed. If you were a warehousing company in Nashville, like Ozburn Logistics, you might merge with a warehousing company in another southeast marketplace.
Today, it's not so simple. We live in a decentralized and multi-dimensional world. It is more important than ever before for advisors to pay attention to the broader marketplace, and incorporate input from many different channels. The right buyer for a freight forwarding company in Minnesota might be another forwarder. Or it could be a warehousing business in Philadelphia. Or a private equity firm in New York. Or a global steamship company in Israel. This turned out to be the case for Interlog, a small freight forwarder which teamed up with Zim Logistics Network to become part of a global giant.
In short, the world has changed. Thomas Friedman had it right: we are living in a "flat world" economy.
Consequently, to be an effective advisor, today you have to see the entire field. In today's "flat world," a 360 degree field of vision is a prerequisite to successful deal-making. At BG Strategic Advisors (BGSA), we are constantly finding new buyers who are exploring the logistics and supply chain market. As the market continues to evolve, we see more and more "out-of-the-box" entrants seeking to gain access, ranging from overseas companies to manufacturing firms to private equity investors to others. Deals like PWC-GeoLogistics, Interlog-ZLN, Air-Road-Reliant Equity, CR England-Dynalink, and others are all examples of non-traditional combinations of buyers and sellers. Hence, to be effective at mergers and acquisitions, we need to constantly refresh our ideas as the transportation, warehousing, freight forwarding, logistics, and supply chain markets continue to evolve.
I started this blog in order to explore a broad range of topics, to share learnings that we are finding in the marketplace, and to solicit feedback from a broad mix of inputs. We will consider ideas such as
- Consolidation of services: opportunity or challenge?
- The China Effect: what does it mean for your business?
- Valuations: how to evaluate companies in the current marketplace?
- And plenty of other issues
Please feel free to respond with your comments, questions and suggestions. I can be reached at ben@bgsa.com, and welcome your input. Thanks in advance. I look forward to the virtual dialogue!
Convergence of Services: Opportunity or Threat?
In the last 5 years, we've witnessed a major new development in logistics: the convergence of supply chain services. Exel bought Power Packaging in a bid to combine contract warehousing with contract packaging. Jacobson bought Wilpak to achieve a similar blend. UTi embarked on NextLeap, a bold five-year plan to integrate freight forwarding, warehousing, and transportation management under one roof.
The big question today: is convergence a winning strategy?
On the one hand, Jacobson's acquisition of Wilpak fueled the company's rise as a multi-service solutions provider. By expanding contract packaging into a core service offering, Jacobson was able to boost its margins, growth rate, differentiation, and value proposition within the consumer packaged goods (CPG) segment. When Jacobson sold to Oak Hill the following year, the company received an attractive valuation that was based in part on initiatives such as the Wilpak deal.
On the other hand, UTi is in trouble. In the last year, the company's stock price has fallen by nearly 50%, from a high of 30.43 in March 2007 to a low of 15.66 in March 2008. What explains this drop-off? Is the NextLeap strategy in question? Or is it more a function of the insourcing of projects from major clients such as Wal-Mart?
In my view, convergence is here to stay. As customers look to reduce the number of logistics suppliers they use, they will inevitably reward smart supply chain partners that can meet that need. In addition, companies like Genco, NFI, Ozburn-Hessey, and others have proven the value they can deliver to their clients by expanding their suite of services. The key is to pursue targeted expansion in easy-to-integrate services that meet a specific customer segment's requirements. Firms that achieve this objective should continue to be winners.
The big question today: is convergence a winning strategy?
On the one hand, Jacobson's acquisition of Wilpak fueled the company's rise as a multi-service solutions provider. By expanding contract packaging into a core service offering, Jacobson was able to boost its margins, growth rate, differentiation, and value proposition within the consumer packaged goods (CPG) segment. When Jacobson sold to Oak Hill the following year, the company received an attractive valuation that was based in part on initiatives such as the Wilpak deal.
On the other hand, UTi is in trouble. In the last year, the company's stock price has fallen by nearly 50%, from a high of 30.43 in March 2007 to a low of 15.66 in March 2008. What explains this drop-off? Is the NextLeap strategy in question? Or is it more a function of the insourcing of projects from major clients such as Wal-Mart?
In my view, convergence is here to stay. As customers look to reduce the number of logistics suppliers they use, they will inevitably reward smart supply chain partners that can meet that need. In addition, companies like Genco, NFI, Ozburn-Hessey, and others have proven the value they can deliver to their clients by expanding their suite of services. The key is to pursue targeted expansion in easy-to-integrate services that meet a specific customer segment's requirements. Firms that achieve this objective should continue to be winners.