Supply chain technology woes could drive more dealmaking

by Thomas Zadvydas, Rachel Stone, Troy Hooper and Sydney Halleman

Supply chain management technology should see more deals in 2022 as the dust settles from pandemic-related disruptions that produced product bottlenecks around the world, sector advisors and participants said.


“There’s a mismatch between demand and supply,” said Jonathan E. Savoir, CEO and co-founder of Quincus, which offers a machine-learning-enabled platform that automates shipping operations. “The supply chain can’t keep up, which is creating shortages.”


Consumer demand, which initially plummeted when the pandemic hit in 2020, rebounded massively in 2021, and companies weren’t prepared for the surge. Labor shortages at ports, outdated infrastructure and rising COVID-19infections among truck drivers and pilots stressed supply chains further, industry sources said.


“Supply chains are not built to swallow those shocks,” said Christian Lanng, CEO of Tradeshift, a supply chain finance business and vendor marketplace.


Tech solutions to ease disruptions center around linking various supply chain points that have connectivity equipment and related data management platforms with AI and machine learning. Information becomes accessible to all stakeholders in goods transport, executives said.


Investors are recognizing the opportunity.


Supply chain tech represents “the single largest software opportunity for enterprise software to date,” said Lanng. San Francisco-based Tradeshift announced in December 2021 a USD 200m raise, including debt from existing and new investors.


Green, Ohio-based supply chain management tech business Surgere is seeking private equity investment for acquisitions, CEO Bill Wappler said for this report. Austin, Texas-based food supply chain tech company JourneyFoods also has received frequent PE pitches, Mergermarket reported in November 2021. It is targeting a capital raise by the end of this quarter, seeking USD 14m with a valuation of more than USD 50m.


Financial backers are interested in pouring capital into all points of the supply chain, from warehouses to distributors to transportation links like plane and trucking routes, all the way down to last-mile delivery.


An added attraction is the USD 1.2 trn Infrastructure Investment and Jobs Act, which was passed by Congress last year and signed into law by President Joe Biden. It allocates USD 250 bn to modernize transportation, port and logistics infrastructure nationwide, funding that could significantly bolster investment in tech companies across the supply chain. The law also includes money to improve rural transport, which should better enable last-mile delivery.


Supplying investment


“Venture capitalists and other investors are definitely following the trend of, ‘How do we make supply chains better?'” Quincus’ Savoir said.


San Francisco-based shipping payment and load scheduling company CloudTrucks announced last November aUSD 115m Series B round led by Tiger Global. CloudTrucks helps retail companies and contract drivers book loads directly through a mobile device app to speed deliveries. Truck delivery is one supply chain area ripe for capital and tech advancement, being under-invested in for years, said founder and CEO Tobenna Arodiogbu.


There are roughly 17,000 different freight brokers, and many of them don’t have the capital to keep up with innovation, said Christian Lee, CFO of Transfix , a New York-based truckload marketplace that is merging with GSquared Ascend [NYSE:GSQD] in a USD 1.1 bn blank-check deal.


Going forward, Lee said he expects the industry to see a “significant amount of consolidation to build tools and products to meet customer needs. It will become a much smaller universe. Unlike some industries where it is winner-take-all, or a winner-take-most market, we don’t think this is a market where one becomes a multibillion[dollar] revenue company.”


Manufacturing supply chain intelligence platform Assent Compliance earlier this month announced it raised USD350m in funding led by Vista Equity Partners, giving it “unicorn” status with a valuation in excess of USD 1bn. Project44, a SaaS supply chain and logistics visibility business, also said this month it received USD 420m from a syndicate led by Thoma Bravo, TPG and Goldman Sachs Asset Management. The deal gave it a pre-money valuation of USD 2.2bn, according to the company.


Large logistics companies like Penske Logistics and DHL want to partner with or acquire growing supply chain tech companies, said Surgere CEO Bill Wappler. “There’s going to be this constant roll-out of new capabilities at the primary, DHL-level of logistics,” he noted. Supply chain tech company Overhaul Group has fielded approaches from strategic suitors in logistics and shipping, co-founder and CEO Barry Conlon told Mergermarket last June.


Widespread fear of supply-chain risk


Supply chain tech deals won’t be limited to the logistics and shipping sectors.

Investments and acquisitions are expected from consumer products companies like Procter & Gamble [NYSE:PG];food and agricultural strategics like Nestlé, Dole Food and Del Monte Foods; and retail giants includingWalmart [NYSE:WMT], sources said.


“Retailers, manufacturers, food — they’re all seeing the risk” of insufficient supply-chain resources, Savoir said. “It will accelerate investment and acquisitions.”


Walmart’s supply chain acquisitions included a tech and IP asset purchase in November 2020 from peer-to-peer last-mile delivery service startup JoyRun for undisclosed terms. JoyRun facilitates the delivery of restaurant and grocery orders used by more than 30,000 people as of the time of the deal.


Tech players themselves have sought targets in bids to control their own supply chains and sell monitoring solutions to large clients in other industries.


Panasonic [TYO:6752] announced in September 2021 it acquired Blue Yonder, a supply chain management solution business involved in transport and warehouse management. It initially acquired a 20% stake in July 2020.The final investment valued Blue Yonder at USD 8.5 bn, Panasonic said.


Similar sector deals could follow.


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