Warburg Pincus invests $255m in BlueGrace Logistics

The private equity firm, which is known for investing in logistics technology, has invested $255 million in BlueGrace Logistics, whose business is largely built around less-than-truckload brokerage and enterprise supply chain management services.    New York-based private equity firm Warburg Pincus has invested $255 million in Tampa, Fla.-based logistics provider BlueGrace Logistics, the companies said Tuesday.
   Warburg’s exact stake in BlueGrace was not disclosed, but it will be a minority stake, BlueGrace President and CEO Bobby Harris said in an interview with American Shipper.
   The deal represents a major vote of confidence in BlueGrace, whose business is largely built around less-than-truckload (LTL) brokerage and enterprise supply chain management services.
   Warburg has been a frequent investor in the logistics space, though typically in software providers. It’s currently an investor in transportation management systems (TMS) provider MercuryGate, of which BlueGrace is a customer, and previously invested in GT Nexus, which it sold to Infor in 2015, and freight brokerage Coyote Logistics, which it sold to UPS in 2015.
   According to experts in the LTL industry, BlueGrace was among the largest LTL-focused 3PLs without investment capital, and Warburg’s funding will be used to significantly grow its staff and support mergers and acquisitions activity.
   Harris said BlueGrace plans to increase staff from 370 at present (from 170 in summer 2015) to 1,000 by 2020. The company will focus on adding employees in areas where it perceives there to be supply chain talent, namely, Chicago; Boston; Richmond, Va.; and Los Angeles.
   He told the Tampa Bay Times that he’s targeting revenue growth from $200 million today to $1 billion by 2020. This year, BlueGrace bought more than two dozen of its franchise locations across the country.
   Founded in 2009 by Harris, the company has seen sizable growth in demand for its enterprise supply chain management services in recent years. About 75 percent to 80 percent of its revenue comes from its brokerage business (largely concentrated on LTL, but present in all modes) but revenue from supply chain management accounts for a larger section of the business each year.
   “Warburg Pincus has been a long-term investor in the technology-enabled logistics market and BlueGrace is a rapidly growing innovator in that industry,” Warburg Pincus Managing Director Alex Berzofsky said. “We see meaningful opportunities for continued growth for the company and we look forward to supporting the BlueGrace team.”
   The logistics provider has mostly grown organically other than three niche acquisitions, of which the two most significant ones were its capture of Chicago-based Freight Ready and Baltimore-based USTC.
Harris said Warburg was the only equity firm BlueGrace entertained an offer from. The company had rejected overtures from other such firms in the past but was swayed by Warburg’s reputation in the logistics industry.
   “They came to us directly,” he said. “We believed they could help us build something amazing. We wanted a good partner and one that we could do big things with.”
   One expert lauded BlueGrace’s technology approach, saying it knew well how to balance the development of proprietary systems with supplemental off-the-shelf systems. Aside from its use of MercuryGate, the company has used project44 to build application program interface (API) connections.
   “Every customer is so different, and so the customization is so difficult,” Harris said. “We’ve had to build a lot of technology so it’s moldable to each customer. But we don’t build something that doesn’t serve our client. That’s just ego-driven building. We’re spending a lot on technology to make it exactly what we need.”
   BlueGrace’s customer base runs the gamut from small shippers to large enterprise accounts, with the latter driving growth of its supply chain management services. Verticals mentioned in the announcement of the Warburg investment include auto parts, beauty products, pharmaceuticals and sporting goods.
   Harris’ background includes stints as a dockworker in Tampa to roles at a subsidiary of Yellow, to owning a franchise that served DHL contracts before DHL ended operations in the United States. The decision to start his own logistics company was accelerated by the DHL move.
   “It created a lot of problems, but it was a blessing because we had to put our beliefs in the LTL and truckload environment on the table,” he said. “We decided that’s the most underserved market.”