The latest run of deals should come as no surprise to many industry watchers. Investment in global logistics has been stunning, as players implement new technologies and strive for end-to-end supply chain management.
We have been working with investor clients trying to assess the value of a deal, especially as the better property gets bought up. Scarce supply means higher prices, and for some, they are too much. The search for bargains is long gone.
At the same time, confused end users, who are trying to assess the impact of this labyrinth of tech companies, wonder if these are good deals that add — or delete — functionality to the portfolio. What will investment in innovation look like? What will happen to tech pricing? Will trading partners buy-in to the change in platform, data standards, log-on protocols, and so on?
Global Trade a Hot — and Pricey — Market
Think of this:
When Descartes acquired Customs Info for $41.5M1 in 2014, Art Mesher2 was told by some “investor types” that Descartes paid too much for it. Art’s response was, “No amount of money would be too much.” Another few deals followed: Descartes gobbled3 up several smaller companies to round-out their GTM portfolio. Subsequently, Descartes put all these plus Datamyne into an integrated GTM solution as well as onto their GLN, the largest logistics network in the world. Talk about good timing! E2open recently acquired Amber Road for $425M, proving Mesher right. (INTTRA was also recently acquired for approximately $300M). This is really big money, an indication of what it takes to acquire the best properties today.
There has been a string of GTM acquisitions, of late. But the big question is how this will affect the partner model. For Descartes, who has mostly stuck to their logistics core competency, it was probably not too difficult to convince the many partners of Customs Info and MK Data Services that Descartes is not a competitor. For E2open, the story is different and a bit more challenging, since E2open overlaps so much with the SCM and ERP players. But end-user customers care less about these issues, as long as the existing integration and services they receive still work.
The Last Mile Is Still the Post Office!
The postal services of the world still have the most extensive — and reliable — last mile for a lot of parcels. Commercial logistics tech companies have tended to ignore them as a market due to the technology that was in-house. Yet, even here, there is a need to integrate to commercial and proprietary, national and international systems.
In addition, post offices are in deep trouble. Regulated by their governments, they have few levers to remain competitive — even solvent. Ratings/prices — unlike commercial parcel carriers — are not usually a card they can play. So service reduction becomes one of the few cost-cutting options, leading to a vicious cycle: less service/fewer customers/less revenue and so on. Parcel is a hot market, though, if post offices can grab more of that. And in fact, parcel is deemed a growth area, certainly in the US. Better technology, then, often provides process and service improvements that can help them regain their competitiveness.
Descartes has aggressively pursued an end-to-end logistics management strategy. Shippers need the ability to seamlessly transact and have visibility as their goods move though whatever mode, company, country, or conveyance. Thus, Descartes’ recent foray into the postal arena with two acquisitions: CORE and Velocity Mail (aka Vmail).4 Whereas Velocity Mail focuses more on air, CORE customers “use CORE’s network to accurately track international mail, parcel and cargo shipments as well as US domestic mail and parcel shipments.” Yes, in many respects there is overlap, but they also have some unique technology and some exclusivity in customer base. Accordingly, this allows Descartes to consolidate this base. Adding the postal networks to the Descartes GLN explodes the network membership further and provides end-to-end tracking for shippers who use a variety of commercial and postal services.
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1 $36M in cash — Return to article text above
2 Retired CEO of Descartes — Return to article text above
3 For example, MK Data Services, Pentant and eCustoms, as well as the bigger Datamyne (for $52M) — Return to article text above
4 We have written about Velocity Mail (aka Vmail). In June 2018, Descartes acquired Vmail for $25.5M. The platform provides air carriers with the tools to scan mail and parcels that they are carrying for postal authorities around the world, thus providing them with real-time visibility. Although physical mail is on the decrease, parcel deliveries are on the increase, making this an important service. Parcel shippers have come to demand granular, up-to-date tracking information based on expectations set by services from the major parcel carriers (FedEx, UPS, DHL). Vmail helps automate the shipment process for air carriers including parcel/mail scanning and tracking, generating routes, and account reconciliation. — Return to article text above
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