Dedicated capacity and technology made AFN stand out
Yesterday GlobalTranz announced its acquisition of AFN Logistics, a Chicago-based 3PL primarily focusing on truckload brokerage. GlobalTranz said the deal would put the company on a $1.5B revenue run rate for 2018; AFN is GlobalTranz’s seventh acquisition since January 2017. AFN Logistics was founded in 2003 by Ryan Daube.
Sources close to AFN estimated that the company was on a $210M top line revenue run rate for 2018, with $8-9M in EBITDA. Bob Farrell, the CEO of GlobalTranz, said our numbers were “low” but did not disclose his figures. FreightWaves spoke to Farrell, and AFN Logistics CEO Owen Schnaper by phone.
“The deal is evidence of the strategy that we talked about back in July,” Farrell said. “GlobalTranz has been very active looking for candidates. It’s a pretty fragmented market, and finding good companies that are in a position to be sold is a hard thing to do, but we looked hard at the market and AFN was a target we identified. The founder of the company had been in for a long time and was in a position to look at a sale of the company.”
We were interested in a couple of aspects of the AFN deal, especially how it would transform GlobalTranz’s portfolio and how much value GlobalTranz placed on AFN’s proprietary technology, AFngine. AFN elected not to use a third party SaaS provider for its visibility and track and trace solutions, but built its own.
“GlobalTranz is tech-focused,” said Farrell. “We built our own TMS and analytics capability, and AFN is going to be able to augment that, and in particular, we’re going to aggregate a lot more data for the purposes of predictive analysis, machine learning efforts, and take advantage of forthcoming blockchain paradigm. A lot of what’s going to differentiate 3PLs are the companies’ ability to leverage their data,” Farrell said.
Farrell pointed out that GlobalTranz had heavy exposure to LTL brokerage, so adding a beverage/water concentrated truckload brokerage like AFN was additive. The conventional wisdom in brokerage is that you can’t make an acquisition to buy customers, but Farrell said that what GlobalTranz liked about AFN was its level of service and the way it took better care of its carriers than its competitors.
“In this current market, one of the biggest challenges is getting access to capacity, and one of the things that AFN has done very well is developing a program around building relationships with carriers that are unique and mutually beneficial,” said Farrell. Farrell appeared to be referring to AFN’s ability to secure nearly dedicated capacity on its dense Niagara, Coca-Cola, and Nestlé lanes.
We also asked Farrell about what the M&A environment looked like going forward in a market characterized by an abundance of buyers and a shortage of sellers.
“We’re going to continue to execute on our strategy organically, but we’re active on a number of other deals right now,” said Farrell. We asked Farrell if he thought the market was still pricing 3PLs at 12-13x EBITDA, and he said, “The multiples in the 3PL logistics space continue to be over a wide range based on a company’s quality of earnings, technology, customer concentration and market presence.”
AFN Logistics CEO Owen Schnaper agreed that AFN’s technology helped them stand out in the marketplace.
“I absolutely think the data analytics makes AFN more compelling—the way we attack data and technology relative to competitors our size, both GlobalTranz and all the prospective investors, they felt that way,” said Schnaper. “Our AFngine is meant to work with everything. It’s a system-agnostic tech infrastructure that allows carriers and logistics providers to work together on the same screen.”
Schnaper went on to say that multiple conversations with customers after the deal was announced yesterday validated AFN’s decision to sell to GlobalTranz. “Our customers said GlobalTranz is really good at xyz, you’re good at abc, and there was a lot of excitement about putting those together,” said Schnaper.
Schnaper also confirmed that the semi-dedicated capacity AFN has been able to lock down on its major lanes made it attractive to GlobalTranz. “To our customers, we feel like an asset-based provider, and GlobalTranz had a really good understanding of that and the value there,” said Schnaper.