M&A Plays in Supply Chain

• Logility acquired MID Retail
• Descartes acquired Customs Info
• E2open acquired SERUS
• Selectica acquired Iasta
• Rocket Software acquired Trubiquity

Supply chains are complex and thus, there are many “pockets” of innovation and service. Applications have proliferated over the decades that continue to add value. As well, new and innovative players have entered the market. Along with these pockets come natural integration points. Over time, often, it makes sense to go from integrating to acquisition.

The last few weeks had some super smart deals in the supply chain market. Let’s take a look at these deals and see what they mean.

Logility

Logility’s acquisition of MID Retail moves Logility into retail in a big way. This is an interesting move for Logility — offering a planning suite for retailers and a broader platform for brand/manufacturers whose business models have evolved. These entities can look toward consumer markets or into their supply chain across their business and channels and leverage their technology investments.

— Back into the supply chain — Retailers are thinking and managing backward into their supply chains, thinking about and getting more involved in the management of supply planning, transportation, and inbound management.
— Forward to the consumer — Brand owners are no longer just suppliers — many are now retailers. This makes them manufacturers, wholesalers, and retailers. They now face the merchandising challenges of assortment and allocation by store and by channel.

The dynamics of the consumer markets are rapidly changing, blurring the traditional line between a retail and supplier business model. In addition, retailers are investing like never before in technology to allow them to understand and manage their business with real precision. With merchandise applications, which by historical standards are pretty new, retailers can move from spreadsheet hell into MFP applications to manage their budgets, selections, and channels with more precision. In combination with Logility’s replenishment, collaboration, and inventory management capabilities, this provides a strong suite for retailers.

Omni-channel is also one of those big defining movements where retailers and wholesalers will have to significantly change, not only how they sell, but how and where they manage their distribution networks and their inventory. Not trivial problems.

So what does Logility get in this deal? New customers (Abercrombie & Fitch, Anna’s Linens, Big Lots, Bon-Ton, Finish Line, Orvis, Tuesday Morning, Urban Outfitters, and Wet Seal); and a state of the art merchandising and allocation solution with a compatible architecture (also developed on the Microsoft stack) to blend into Logility Voyager solutions. They also get seasoned retail vets who understand the complex challenges facing retailers today, and who can assist in successful project deployments. MID gets Logility’s great marketing and sales.

Descartes

Logistics and trade content go together in today’s global chains. So this deal is one of the more interesting ones for the already acquisitive Descartes. Customs Info (aptly named) manages and provides trade/customs content (trade tariffs, duties, regulations, trade agreements, rules of origin and other trade-related content) for over 800 international shippers. Customs Info has steadily worked its way into the leadership position in this challenging market sector. Besides that mega-shipper customer list, Customs Info also supplies data to many other supply chain solutions providers¹ that rely on up-to-date information to enable their global planning and execution systems.

Customs Info is not just a content company. It has many tools and applications, such as data mining and the ability to help shippers create accurate trade information (documents, assigning the right coding for exporting products, and so on) to assist in global trade management; and analytics to take advantage of trade regulations that save tariffs and taxes and comply with regulations to avoid violations and fines.

“This trade data populates GTM [Global Trade Management] systems, including SAP GTS and Oracle GTM, and includes trade tariffs, duties, regulations, trade agreements, rules of origin and other trade-related content. Customs Info also provides one of the leading online global trade research tools used by thousands of trade professionals, as well as a SaaS-delivered classification solution to help trade professionals and multi-national shippers quickly build and easily maintain complex classification databases for their operations around the world. Customs Info also provides duty and tax content to some of the world’s largest e-commerce sites.”²

Customs Info will now have even greater access to a worldwide network (Descartes has about 150 K currently connected to their GTN) and Descartes customers will get access to Customs Info’s analytics to help further optimize the global trade spend.

Today, everything is on the table in cost reduction. Now that companies have greater access and visibility to all aspects of the global trade and transportation process, they can optimize transportation costs as well as analyze and optimize their tariffs. Having a clear understanding of the customs, duties and tariffs and total landed cost allows companies to model and do trade-offs on sourcing and logistics strategies.

E2open

E2open’s acquisition of SERUS is another interesting deal. Both companies’ strengths are in managing the high tech supply chain. E2open is another cloud leader from the early web days that has focused on materials procurement and planning for many years. In recent times they have extended their platform to include transportation visibility. But the SERUS deal really makes sense for E2open, since this further enhances E2open’s value to the high-tech market. From fabless semiconductor design to contract manufacturing and design for managing across outsourced networks, the new combined platform can help manage the entire high-tech lifecycle from concept to delivery.

One of the interesting points here is that OEMs can now have better collaboration and visibility to processes that are critical to product differentiation and time to market. Design, NPI, forecast and planning as well as logistics visibility is a unique combination in the market. In particular, gaining visibility in the semiconductor chain has been problematic due to the long lead times and supply chain complexities in this market. Since end-markets such as electronic, aerospace and defense, industrial and medical equipment are all dependent on continued innovation and production from semiconductors, having tighter connections is important. In particular, SERUS “monitors all supply chain progress on a granular level, allowing partners to review detailed root cause analysis and make recommendations for solutions to problems that arise.”³

SERUS brings customers such as AMD, Cypress, Flextronics, IDT, Juniper Networks, NVIDIA, Oracle, and Qualcomm Atheros to the E2open community.

Iasta and Selectica

The procurement market has seen a lot of deals over the years. And another logical merger brings Selectica and Iasta together. Their customer bases are largely complementary as well. Here we see the extension of the procurement lifecycle. Selectica, an enterprise Contract Lifecycle Management (CLM) provider, is a natural complement to sourcing.

The best-of-breed standalone companies seem to eventually find great partnerships. But even with that in mind, other acquisitions such as Ariba/SAP, SciQuest/Upside, or IBM/Emptoris/diCarta put those companies in the big (and usually expensive) solution category. Iasta had and promises to keep their friendlier vibe and values.⁴ Said David Busch, “We would not (and did not) move forward with people that do not reflect our core values and working environment. As one of three founders, I can honestly say Iasta is part of our extended family; it is an extension of us. It is therefore inconceivable for our executive team that we would ever merge with another entity that did not continue this tradition.”

As part of the Selectica family, Iasta will continue expanding its focus in spend analytics, business intelligence, sourcing, and supplier management. Moreover, by bridging key elements of upstream procurement with an enterprise contract platform, Iasta is better equipped to advance the most pressing client needs within upstream procurement. Iasta also becomes part of a wider Selectica platform solution dedicated to managing the complexities of B2B relationships related to compliance, governance, and risk.⁵

Since contracts are the bridge between sourcing and procurement, one question is whether the Selectica/Iasta vision includes further acquisitions or a merger with a P2P vendor to create a full end-to-end suite. Even so, that is probably a ways off — first things first to integrate the two technologies and organizations.

Rocket Software

The Rocket/Trubiquity deal is a bit different than the other deals we’ve discussed.⁶ Rocket Software is more of a “development firm.” However, over the years, these developments move from being tools to being deployable products. In particular, Rocket has a large integration portfolio which meshes well with Trubiquity’s, which has trading partner integration solutions (EDI, MFT, trading partner platforms, etc.) for industries such as automotive. Large enterprises and their trading partner networks have a myriad of challenges in data management and information integration that this combined company can tackle.

Lately the EDI networks have found other homes, such as GSX’s acquisition by OpenText, Sterling by IBM, DiCentral’s acquisition of EMANIO, SPS’s acquisitive history, as well as HighJump’s acquisition of TrueCommerce a few years back. Standalone EDI hubs, though they will continue to operate for many years to some, just don’t haul in the big revenues that they used to and need other elements to keep growing. In fact, DiCentral and SPS, as examples, don’t even like to be called EDI, but rather “supply chain solutions companies.” DiCentral’s recent acquisition of SmartTurn, a cloud-based WMS previously acquired by JDA, is such an example. And going a bit further back in history, Sterling, while still a standalone cash cow, decided to enrich its software portfolio with acquisitions such as Yantra (WMS).

Rocket’s acquisition of Trubiquity, unlike the above-mentioned deals, will require the two teams to sort through their portfolio and people and probably shelve a few things.

Andy Youniss, President and Chief Executive Officer of Rocket Software, says Trubiquity “ — ensure[s] that the right data is delivered in the right format at the right time, both within a company and between companies. These solutions fit well with our data access and integration offerings — ”

Observations

Each of these deals strengthens the core focus area and industry presence of the acquirer. In decades past, many companies chased acquisitions that got them far afield from their core markets. (Some of us can remember back to Manugistics chasing the semiconductor market, which turned out to be a pretty bad deal, or RedPrairie chasing small companies with that SmartTurn acquisition.) That can sometimes work. But even if such mergers do succeed over time, they are hard to pull off. Salespeople don’t understand the customer and the industry and, as a result, can’t sell the solution.

However, solutions that support a continuous or highly dependent business process such as sourcing and contracting (Selectica/Iasta), or merchandising and replenishment (Logility/MID), are naturals.

The industry focus is also important; these companies demonstrate that they understand the customers’ challenges. Andindustries such as Transportation (Descartes), High Tech (E2open), Automotive(Rocket), and CPG/Retail (Logility) are giant landscapes in which each of these companies can spread their wings and sell not only to new prospects but provide a lot more value to existing customers. We hope they keep that focus!

Sometimes companies make acquisitions and we feel, “What were they thinking?” And sometimes those deals don’t work out too well over the long haul. These are “we are sticking to our knitting” type acquisitions, which are highly compatible with their core markets and business. Thus our expectation is that these deals will add additional revenue both in the short and longer term and will make the new companies stronger competitors in their respective markets.

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¹ SAP, Oracle, etc. — Return to article text above

² Statement from Descartes’ press release. — Return to article text above

³ Excerpt from E2open announcement here. — Return to article text above

⁴ Announcement from Selectica here. — Return to article text above

⁵ Read an insightful analysis from Jason Busch and Pierre Mitchell from Spend Matters. — Return to article text above

⁶ More on the Rocket /Trubiquity deal here. — Return to article text above

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