Cover Story that milestone . With all but project44 likely too small to consider a public offering , the only viable options are to trim costs and win more business until they become profitable or find an acquirer .
De Muynck said the latter would be tough . “ A lot of the functionality is not differentiated , and so there is no upside for a larger vendor to acquire a smaller vendor ,” he said .
“ Raising growth equity rounds right now is effectively impossible , unless you are growing extremely fast .”
Brian Glick , CEO of logistics systems integrations specialist Chain . io , which is tasked with connecting many of the visibility providers to shippers ’ and 3PLs ’ execution systems , agreed .
“ I don ’ t know why a visibility company would buy another one at this point ,” he said . “ The original set of acquisitions were about getting coverage for different modes and geographies .
“ Now , it would be more about buying customer lists ,” Glick said . “ I don ’ t think the smaller ones have a big enough reach to make their customer lists interesting enough for the big ones . I think the big ones are too highly valued to sell to each other .”
Glick added that other software companies and 3PLs would be hesitate to “ buy a shortcut to what they ’ d see as a feature in their suite ” at current valuations . “ If I ’ m [ TMS provider ] Blue Yonder , I ’ d argue that I could build any visibility provider ’ s functionality for a lot less than what I ’ d pay to buy them .”
Another technical challenge to market consolidation is that previous platform combinations haven ’ t really helped the market concentrate . They ’ ve either extended the modal or geographical reach of a vendor , or added to their customer list , but the market fragmentation persisted .
“ The multiples on our revenue or some of our competitors ’ would be high enough that a project44 or FourKites , which already has these capabilities , does not have the cash to acquire other companies ,” Dodeja said . “ And the founders would not settle for lower multiples in a sale as long as they have money in the bank and they continue to go win in the market .”
Dodeja said visibility providers are in “ capital preservation mode ” and larger firms no longer have the growth rate to raise the capital needed to fund acquisitions .
“ Raising growth equity rounds right now is effectively impossible , unless you are growing extremely fast ,” he said . “ And the struggle that logistics tech companies had in 2022-23 , where if you look at their metrics , they might not look as appealing to a potential buyer .”
email : eric . johnson @ spglobal . com
14 Journal of Commerce | December 2 , 2024 www . joc . com