Last month FreightWaves reported on The Jordan Company’s acquisition of GlobalTranz for a reported $400M; this morning GlobalTranz Chairman and CEO Bob Farrell spoke to us by phone on the tech-oriented 3PL’s next moves.
Farrell discussed what he thought made GlobalTranz so attractive to buyers, the culture of the company, and where GlobalTranz is looking next for M&A opportunities. The conversation began by looking back at the The Jordan Company deal.
“GlobalTranz, prior to the deal, had a great set of very supportive investors,” said Farrell, “but like with any company as you evolve and grow, the requirements you have for investors change, and we needed to graduate to the next tier of investor. We talked to a lot of different parties, and financial sponsors, other strategics as well as others in the 3PL space. What ultimately made us attractive at a 100,000 foot level was the fact that we had a two-pronged financial performance story, with both profitable growth through M&A and organically; growth in 2017, for example, was a 50-50 mix of organic and acquisitions,” Farrell said.
“A lot of companies have been able to achieve growth through M&A, but not organically, which suggests you don’t know how to grow. We’ve been able to do it both ways—you look at the history of GlobalTranz since our inception in 2003, it’s a nice up-and-to-the-right chart.”
While many brokerages and 3PLs talk up their tech game, GlobalTranz conceives of its technology as stand-alone products and invests in them accordingly. “First and foremost is our technology—since we started we’ve been differentiating ourselves through technology. A lot of companies say that, but we live it every day. Everything goes through a technology lens, including things like order flow, customers, track and trace, claims resolution, and the way we go about getting capacity. We’re leveraging tech dramatically. We’re at a run rate of $1.2B in revenue in 2018, if you look at the staff we need to do that on a proportional basis compared to six years ago, it’s clear we’ve made huge strides in efficiency,” said Farrell.
“I think we’re very efficient compared to other public companies. We need sufficient profitability to continue to invest back into our technology. We have 130 resources 100% dedicated to the development and deployment of technology products, and that excludes people in the company who are IT types—these are software development and project management people, lead by our CTO Greg Carter, who’s really a software company CTO. I say that because a lot of 3PLs build their technology in a corporate IT way as opposed to a software product way. The way we do it, it could live on its own, with multiple customers in a multi-tenant cloud environment without your own individual network having to be part of the solution. That’s a big part of the solution for us and keeps us nimble,” Farrell said.
Other factors that made The Jordan Company interested in GlobalTranz included a multi-channel approach to sales, with an even mixture of revenue coming from agents and direct resources, and what Farrell said was GlobalTranz’s unique ability to get access to capacity for its shipper customers.
Then the conversation turned toward the current M&A environment, and Farrell’s outlook for GlobalTranz’s ability to grow quickly by tacking on other companies at an extremely liquid, capital-rich point in the cycle.
“We do have the ability and the engine inside to continue doing M&A, and that’s going to be interesting to any financial sponsor, and hopefully we’ll be announcing a deal very shortly,” Farrell said.
FreightWaves asked Farrell about GlobalTranz’s rumored bid to acquire Transportation Insight, a 3PL with $30M in EBITDA. Sources had reported that GlobalTranz came in with a 13x multiple bid, the second highest, and was unable to close.
“First of all, I can’t comment on any rumors to any specific parties,” Farrell cautioned, “but just to the situation more generally. In the environment today, the reality is there is a lot of private capital available—you can find a lot of information about how big private equity funds have gotten over the last five to ten years, and there are fewer and fewer good assets out there for these guys to buy. So in many cases they are getting very aggressive on their prices just to get assets into their portfolios, which makes it harder for strategic investors. You’re going to win some and you’re going to lose some, whatever you do, and this is true for GlobalTranz as well.”
“We’re going to stay disciplined for certain financial metrics. We’re willing to pay aggressive multiples where that makes sense, but we’re not going to pay stupid multiples and put the firm at risk by overpaying. Overpaying only makes sense when you have really outstanding expense synergies, but the M&A deals we’re looking at don’t have those [synergies] because we’re looking to buy companies that have transformational benefits, in that we’re getting access to new customers, geographies, modes, etc… when we go into deals it’s all about preserving the core value of the target we’re going after. In some cases we’re going to be competing with private equity, and they might be looking at the deal to found a platform for themselves… we just have to let those dynamics play out,” said Farrell. Farrell mentioned international freight forwarded, intermodal, and managed transportation as areas that GlobalTranz was actively looking at for further acquisitions.
Finally, we talked about GlobalTranz’s culture of empowerment, diversity, and personal growth. Farrell said that not only did GlobalTranz have a roughly equal gender balance in its workforce, but that the management team was evenly balanced between men and women, too. “If you operate the right way, it should naturally pan out that way, if everybody’s being treated equally,” said Farrell.
Farrell said that GlobalTranz had always been committed to being a great place to work—one reason why the company built an 8,000 sq ft gym in its corporate headquarters—and was building a new office in downtown Minneapolis “as cool as anything in Silicon Valley.” “You have to have the flexibility that people need for their lives,” Farrell said, “but taking it to the next level, we want our people to feel empowered to engage with our customers and make things happen without being worried about making a mistake, and using the work environment as a catalyst to helping people grow personally and in their careers.”
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