NEW YORK — At a daylong conference earlier this month focused on the explosion of private equity interest and money in the logistics sector, attendees heard from a CEO behind one of the biggest deals of 2021: the merger that brought together 3PLs GlobalTranz and Worldwide Express.
Bob Farrell of GlobalTranz told a conference sponsored by the Benesch law firm that “private equity is about turning intentions into reality.” And with the backing of CVC Capital Partners, that happened this year when truckload/LTL-focused GlobalTranz merged with Worldwide Express, creating a logistics giant that has significant parcel capabilities through Worldwide and the longer-haul business that GlobalTranz has long been known for.
Giving the keynote enabled Farrell, the CEO of GlobalTranz at the time of the merger, to discuss at length the process leading to a combination rarely seen in the brokerage sector.
His keynote discussed the recent history of GlobalTranz, dating back to his first stint as CEO beginning in early 2016. That lasted until 2019, when he was replaced by Renee Krug. She left the company in September 2020, and Farrell took over again. The deal with CVC and Worldwide was announced in June.
Farrell said the GlobalTranz he joined in 2016 was not ready to grow through acquisitions. Working with GlobalTranz’s PE owner, Providence Equity Partners, the company set a goal to have $30 million in earnings before interest, taxes, depreciation and amortization before it would “go out and take a look at the market.”
But first, it needed to get bigger. Farrell said in 2017, GlobalTranz began an acquisition program that resulted in 13 purchases “that allowed us to scale the company dramatically.” “Some of it was transformational and brought new capabilities into the company,” Farrell explained.
Watch: Bob Farrell of GlobalTranz
He said acquisitions helped grow GlobalTranz’s managed transportation capabilities as well as adding to its truckload brokerage operations.
That $30 million EBITDA milestone came in 2018. And in June of that year, GlobalTranz was sold to The Jordan Co.
After that acquisition, Farrell said, “we kept driving the company forward.” Another acquisition was completed (Farrell did not specify the target company),, GlobalTranz and Jordan agreed on their “next objectives,” and then an unusual thing happened: Jordan thought about selling.
“Based on the market environment, Jordan found itself thinking it was a good time to take a good look at the market,” Farrell said.
And so GlobalTranz was sold again. The buyer? Providence Capital Partners, which had sold GlobalTranz to Jordan just about a year earlier. The price of GlobalTranz paid by Jordan in 2018 was about $400 million. When Providence bought it back, it had shot up to $930 million.
“A great IRR obviously,” Farrell said, using the acronym for internal rate of return.
“The story of [the combined company now] is that it has well over $5 billion in revenue,” Farrell said. Each company came into the deal with about $2.4 billion in revenue.
When the pandemic hit, Farrell said, GlobalTranz did the same thing a lot of companies in many fields did: It pulled down its revolving lines of credit to ensure liquidity.
But GlobalTranz remained on the acquisitions trail. The possibility of a tie-up between Worldwide and GlobalTranz had been a topic of discussion between Farrell and Worldwide management going back to 2017, Farrell said.
And while the talks between Farrell and Worldwide executives may have been off and on for several years, Farrell said GlobalTranz got particularly interested when it learned in the spring of this year that Worldwide “was running a process.”
The prospect of bringing GlobalTranz’s truckload and LTL business under the same roof as the parcel business of Worldwide was attractive. Said Farrell: “We wanted to get into that.”
While the merger between Worldwide Express and GlobalTranz was led by CVC Capital Partners, investors who owned the individual companies continue to have stakes in the new company. That includes Providence as well as Ridgemont Equity Partners, which was the lead investor in Worldwide Express.
“We had a lot of different conversations on how it would look,” Farrell said.
For example: What if a customer had previous dealings with both companies but had a bad experience with one of them? How would the LTL operations of GlobalTranz mesh with the activities of Worldwide Express, which by definition are more downstream?
“We took stock of all those things and recognized that while there were great synergies on pricing and technology, there was a lot of value to go to the market with separate brands,” Farrell said.
As a result, while the two companies may be together under their current ownership, they continue to operate under their own brand names.
But the combination of GlobalTranz and Worldwide means that customers of either company have access to the respective sister company’s 3PL services that can touch everything from a truckload full of merchandise to a parcel service.
In any merger of 3PL companies, Farrell said technology is a challenge. Multiple transportation management systems might end up lumped together under the new management. Those 13 deals at GlobalTranz that Farrell had referred to often involved a TMS “that had some sort of secret sauce or specialty that the others didn’t have.” And since the next generation of systems wasn’t ready to go, those individual TMS operations needed to stick around.
Although GlobalTranz would be easily classified as a 3PL, Farrell said that “from the get-go, we thought of ourselves as a technology company.”
“Yes, we wanted to move freight and we wanted to have strong partnerships,” he said. But ultimately, it was a technology model the company pursued.
When Farrell and his management team took their slots in 2016, he said the management structure was overhauled to resemble a software company, with product managers and adoption of “agile” management systems.
“We told our employees we were a technology company and we invested that way,” he said.
At a conference devoted to the role of PE in the logistics field, Farrell was on message. “The essence of all this is that PE can be great,” he said.
The involvement of PE in the various ownership deals involving GlobalTranz was “the good,” Farrell conceded. But he also had some cautionary observations.
Some PE companies, he said, have management teams that get deeply involved in the operations of the companies that they invest in. “There are companies that show up with a playbook and say, on Page 3, this is what we’re going to do,” Farrell said. If your company takes on PE as an investor, Farrell added, “you have to be comfortable with the level of involvement and what they want to achieve.”
Taking on significant amounts of debt to get a deal done might be a new experience for some business owners. GlobalTranz was comfortable with leveraging its acquisitions up to seven times EBITDA, “which you might think is really high,” Farrell said, and on the day of an acquisition, “I felt it too.”
In a pair of reports released by ratings agencies in June 2020, the debt level of GlobalTranz was seen as a significant issue, having blown up to eight times EBITDA. That led to a ratings downgrade by both Moody’s and Standard & Poor’s Global Ratings.
However, GlobalTranz executives said at the time that the level of debt was inflated by that pulldown of revolving credit lines at the start of the pandemic.
Farrell said in many of the company’s deals where leverage was up at the 7X level, the company was able to “ratchet down fast.”
“But you might not be comfortable with that” was the message Farrell gave to the room peopled with investors and potential targets of those investing firms.