Phoenix-based freight brokerage and third-party logistics provider GlobalTranz (GTZ) announced at a companywide town hall meeting Thursday morning that Chief Executive Officer Renee Krug was leaving the company. Bob Farrell, GTZ executive chairman and former CEO, will step back in to fill the role. Farrell said that GlobalTranz was not conducting a search for a new CEO and that he was committed to the job on a long-term basis.
“Renee has made invaluable contributions to GlobalTranz first as the company’s CFO and then as the company’s CEO,” Farrell said in a statement. “She has been instrumental in the company’s growth and market leadership. I join everyone at GlobalTranz in wishing Renee all the best in her future.”
Krug joined GlobalTranz in 2014 as the company’s chief financial officer after a stint as executive vice president and CFO at Clear Channel; prior to that, Krug spent seven years in Swift Transportation’s finance department. She was CEO Bob Farrell’s hand-picked successor when he stepped back to become GTZ’s executive chairman in January 2019.
“After six amazing years at GlobalTranz, I am stepping down from my role as CEO,” Krug told FreightWaves. “I plan to spend time with my family and enjoy some outdoor trips before embarking upon my next adventure. I’m very proud of the extremely successful run at GlobalTranz and growing the business from $300M to $1.8B in revenue in a few short years. There has been so much transformation in the business over the past few years and I am confident GlobalTranz is positioned well for continued success. I will continue to be an investor in the business and an advocate.”
Beginning in 2017, GlobalTranz embarked on an aggressive M&A strategy spearheaded by Farrell and then Krug that included 11 deals, most recently Cerasis in January 2020. Other notable acquisitions were Chicago-based freight brokerage AFN Logistics in October 2018 for $140 million (the price was estimated by 3PL M&A advisory firm Armstrong & Associates; Farrell said that $140 million “is not the correct number”) and Circle 8 Logistics in April 2019.
Providence Strategic Growth, which invested in GlobalTranz’s 2014 Series C, was a seller when The Jordan Co. bought GlobalTranz in 2018 for a reported $400 million. Then followed an exceptionally short holding period when Jordan flipped GlobalTranz back to Providence Equity Partners—a different fund at Providence—in May 2019, during which GlobalTranz was able to double earnings before interest, taxes, depreciation and amortization (EBITDA), according to GlobalTranz executives at the time.
Krug was a prolific deal-maker in the third-party logistics industry, but integrating newly purchased companies was more complex. GlobalTranz began with an agent-based model but acquired centralized freight brokerages; over time GlobalTranz was able to buy out a few of its agents. The company still has more than 700 agents and does not have a formal program to buy them back but does opportunistically, Farrell clarified.
Numerous acquisitions led to a leadership team that arguably became top-heavy and political, as former freight brokerage chiefs joined a growing roster of vice presidents and jockeyed for influence. The ownership of customer relationships and compatibility of technology platforms sometimes became contentious issues, according to former and current GlobalTranz employees.
“Integrating companies is very difficult,” Farrell said. “We’ve done it well, but it hasn’t been without its challenges. Some of this is people who don’t get to stay, but that is factored into our analysis when we buy those companies in the first place. Sometimes people make a lot of money and they want to go spend it; some arrangements for transition periods are lengthy but the plan was always to leave, which is typical in M&A.”
In September 2019, Greg Carter, GlobalTranz’s chief technology officer, was terminated. Farrell said that “things weren’t working out.”
This June, Moody’s cut GlobalTranz’s credit rating to Ca1, deep into “junk” territory. In a report explaining its decision, Moody’s cited the $75 million of cash on GlobalTranz’s balance sheet, its $33 million annual interest expense, and weaker earnings.
Krug and GlobalTranz Chief Financial Officer Lara Stell defended the company’s finances, saying that GTZ had pulled available capital from its credit revolver purely as a defensive move during the pandemic.
“Our modeling doesn’t show that we need to use any of those revolver funds,” Stell told FreightWaves on a June phone call with Krug. “We could pay them back anytime we wanted to.”
In a phone conversation with FreightWaves, Farrell gave an update on GlobalTranz’s finances and said that the company enjoys its strongest cash balance ever and has paid back its credit revolver.
“We’re continuing to look at ways in which we can organically grow in excess of how the market is growing and augment that with sensible M&A,” Farrell said. “Right now, the problem is that good companies don’t want to sell. We’ve talked to a number of targets, but they’re going to wait until they get their numbers back to where they need to be.”
This is a developing story and will be updated as more information becomes available.