GlobalTranz, a top 10 3PL, announced this week that Chief Executive Officer Bob Farrell would transition to Executive Chairman and that Chief Financial Officer Renee Krug would become GlobalTranz’s new CEO. FreightWaves spoke to Farrell and Krug about GlobalTranz’s exponential growth over the past three years, its equity sale to The Jordan Company, and what the M&A climate for brokerages and 3PLs looks like going forward.
First, we asked Farrell about his tenure as GlobalTranz CEO.
“I joined in 2016, and since that time, GlobalTranz has grown dramatically both through organic means and by some acquisitions,” Farrell said. “Over the last three years we executed well and exceeded expectations in terms of financial plans, and garnered more awareness across shippers, carriers, and 3PLs. As senior management of any PE-owned company, our focus is on driving shareholder value. We did get a great return for our investors.”
Farrell said that GlobalTranz was on track to finish 2018 with $1.5B in revenue. He pointed out that his transition to executive chairman was not unusual for acquired companies in the 3PL space, citing Transplace’s Tom Sanderson and NTG’s Kevin Nolan as CEOs who made the same move.
“As executive chairman, I’m going to continue working on strategic initiatives, particularly on M&A and work we need to do in the industry to make ourselves more well-known across multiple constituencies, strategizing on things we might want to do from a capital perspective,” Farrell concluded.
We asked Krug why her skill set, coming from the CFO position, was best suited to lead GlobalTranz through a new stage of growth. Krug said that she actually had a non-traditional background for a CFO, having started in programming before making the leap to finance.
“When I was at Honeywell,” Krug recounted, “I was part of their technology team, Six Sigma, procurement, finance, and shared services, so I had a variety of roles that I participated in, which gave me a great foundation. I started with GlobalTranz in 2014, with the goal of driving profitability and establishing a stable foundation for our accelerated growth. Over the last couple of years, we’ve hit the gas pedal in terms of driving that growth, and we have lots of acquisitions in the pipeline.”
Krug and Farrell also discussed the mergers and acquisitions environment for brokerages and 3PLs, noting both upward and downward pressures on multiples, depending on the kind of company.
“If you want to look at technologically advanced growing companies with strong EBITDA, multiples are holding pretty firm,” Farrell said. Farrell said that valuations for digital brokerages were “frothy.”
“You look at Convoy and Uber Freight, who have unicorn-like valuations and have raised a pile of dough, without really having much business yet… the perception that they have better digital freight matching capabilities than incumbent 3PLs do is still a force in the market,” Farrell said.
Both Farrell and Krug said that more restrictive credit conditions have helped drive down multiples paid for regular brokerages in the private equity market because PE investors use a combination of debt and equity to make their acquisitions.
“When credit markets are restricted, it does have an effect on multiples, but we look at the value proposition that a company can bring to us,” Krug remarked. “We look at culture—rapid growth, customer-focused, carrier partnerships—but also value, whether it’s a different mode, or a new technology we’re interested in.” Krug said that GlobalTranz could do two or ten acquisitions in 2019, based on what was available in the marketplace, and projected double-digit revenue growth for next year.
“Over the next couple of years, you’ll see accelerated profitability, which is important for the business, important to invest in our people, our acquisitions and our facilities. I’ll feel successful when we’ve achieved the platform that our people love coming to work, our customers appreciate the value we bring, and our investors feel like they have a great return,” Krug said.