February 18, 2025 • 42 mins
Supply-chain executives are more optimistic about freight markets and the pace of mergers and acquisitions in 2025. Deals can be a win-win for buyers and sellers as seen by RXO’s recent acquisition of Coyote, UPS’ brokerage business. The transaction lets UPS focus on its parcel business while provides RXO with significantly increased market penetration. Some deals are motivated by companies expanding their specialties in a service or geography. In this Talking Transports podcast, Ben Gordon, founder of BGSA Holdings and Cambridge Capital, joins Lee Klaskow, Bloomberg Intelligence senior transportation and logistics analyst, to share his insights about the state of the M&A and private equity markets for transportation, logistics and tangential technology companies. Gordon also discusses what can motivate a seller, and valuations.
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Speaker 1 (00:08):
Hi everyone, this is Lee Clasgow when We're Talking Transports.
Welcome to Bloomberg Intelligence Talking Transport Podcast. I'm your host,
Lee Claskow, Senior free transportation Logistics Analysts at Bloomberg Intelligence,
Bloomberg's in house research arm of almost five hundred analysts
and strategists around the globe. Before diving in little public
service announcement. Your support is instrumental to keep bringing great
(00:29):
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Speaker 2 (00:42):
Today.
Speaker 1 (00:42):
I'm very excited to have Benjamin Gordon with us. He's
the founder of BGSA Holdings and Cambridge Capital. Ben draws
on a career spent investing in advising and building supply
chain and technology companies. At BGSA Holdings, he led the
firm's efforts advising on over one billion worth of supply
chain transactions. Prior to BGSA Holdings, Ben founded three Plex,
(01:06):
the internet solution enabling third party logistics companies to automate
their businesses. Three Plex was later acquired by Bersk Prior
to three Plex, Ben advised transportation logistics clients at Mercer
Management Consulting, and prior to Mercer, Ben worked in his
family's transportation business AMI, where he helped the company expand
(01:28):
its logistics operation. He received a master's in Business administration
from Harvard Business School and a Bachelor of Arts degree
from Yale. Ben, thanks for joining us on the podcast.
Thanks so much for being here.
Speaker 3 (01:41):
Thanks Ley, great to be with you again.
Speaker 1 (01:44):
And you know Cambridge Capital BGSA. I know them well,
but maybe not a household name for our listeners. Can
you tell us a little about the organizations that you founded?
Speaker 3 (01:53):
Sure, glad to so. BGSA is an investment bank. I
started it in two thousand and two after we saw
three Plex, the SAASTMS company that you mentioned. The reason
I started it was I had all these investment bankers
calling on me when I was running my logistics software company,
three Plex, and most of them didn't really understand the
(02:14):
business as well as we did. Now, maybe that's to
be expected, because an operator should know is business better
than somebody on the outside. But I thought there was
an opportunity to build an investment bank that could provide
M and A and advisory services for CEOs of logistics
and supply chain companies based on deep domain expertise and
(02:35):
over the course of twenty two twenty three years done
over fifty M and A transactions. We've worked with lots
of top companies giants like ups, FED, XDHL, Quintin, Augleshanker, Panel, PENA,
NFI and many others, and that business continues and continues
(02:55):
to work with lots of trific companies in supply chain.
Cambridge Capital is the private equity firm that we started
in twenty ten. Cambridge invests in outstanding logistics and supply
chain companies and the premise there is use what we
know as operators and investors to pick great people, building
(03:18):
great companies and then bring them extra resources to help
them scale up faster. The model at Cambridge is invest
both growth equity and buyout capital in terrific businesses. We
had the great fortune of meeting Brad Jacobs and being
an original investor with Brad in XPO back in twenty eleven.
(03:40):
We've invested in a number of companies since then's day.
We've got a portfolio of nine companies across multiple areas
of the supply chain sector and so on the BJSA side,
provide advice on the Cambridge Capital side, put our money
where our mouth is and get involved in supporting great
people building great businesses.
Speaker 1 (04:00):
Sounds like that keeps you extremely extremely busy. Now I
know BGSA they hold a big conference every January down
in Florida, so we're just coming off of that. Can
you talk about the takeaways from the conference?
Speaker 3 (04:15):
Sure? Absolutely so. This is our nineteenth annual BJSA Supply
Chain CEO conference and biggest and best yet. We had
three hundred and eighty CEOs and other supply chain leaders
here in Palm Beach at the Breakers apparently the epicenter
of the universe now given the proxity tomorrow Lago, So
a lot of people here and a few interesting takeaways.
(04:39):
First of all, the level of bullishness enthusiasm, I would
say is exceptionally high. One way to measure that is
we actually survey the CEOs and attendees that join us
and question that. We asked, what was the growth for
your company last year and what do you expect for
this year? And more than seventy percent expect over ten
(05:04):
percent growth this year, which is noteworthy certainly, you know,
looking at the public comps. That means much stronger growth
than what the past year produced for the sector. And
then a second data point is we ask people about
their appetite for M and A both in terms of
their opinion. So we ask what level of M and
(05:26):
A activity do you expect for the industry this year?
And then we also ask how likely are you to
consider doing something mergor acquisition, investment, or otherwise. About seventy
three percent expect more M and A activity in the
industry this year, and more than seventy percent say they
are either very likely or somewhat likely to do something
(05:48):
themselves this year. So I think that tells you something
about both overall industry enthusiasm and bollishness after a long,
deep record freight recession. It also tells you something about
the appetite for M and A and deal activity.
Speaker 2 (06:05):
And you know, when.
Speaker 1 (06:07):
Talking about appetite for more deals this year, are there
any sub sectors that you know you think that are
more ripe than others for transactions?
Speaker 3 (06:17):
Yeah, definitely. So I mean, first of all, let me
address that in two ways. First of all, thematically, Okay,
So thematically, I mean there's lots of M and A activity.
But I would highlight three areas in particular. One is divestitures,
where big companies are shedding what they perceive as non
(06:38):
core assets. So an example would be UPS selling the
Coyugi Logistics division to RXO to get out of the
truck broke region to focus on the core parcel and
an e commerce logistics business. Similarly FedEx spinning off FedEx Freight,
h Robinson selling it to European division to Sender, Marist
divesting Sply Chain Service you know as well. So divestitures
(07:01):
I think are one theme, particularly for public companies. Second
is consolidation. Guys that are great at one thing, they're saying,
let me do more of it. A great example would
be DSB buying Schenker for fourteen billion, the RXO deal,
RXO buying Coyote. It was a divestiture for UPS, it
was a consolidation for RXO, Wistech buying a string of companies,
(07:25):
and Global Trade Management, so those are all consolidators. And
then a third theme would be specialists, people that are
saying I'm going to go deeper in niche areas. For instance,
in reverse logistics, DHL bought inmar which followed on moves
that FedEx and UPS had made in the reverse logistics arena,
UPS going deeper in colt Chaine buying vpl and frigotrons.
(07:49):
And so I think all three of those themes, divestitures,
consolidation and specialists, those are all things that we're going
to see a lot more of. The Other thing that
I would add is I think you will see more
M and A from a sector standpoint in a variety
of fragmented areas. Truck brokerage certainly an obvious one, you know,
(08:09):
freight forwarding, warehousing, etc. But interestingly, one of the things
that I learned from watching Brad Jacobs, Brad took a
fragmented market and consolidated. Even though there's still much more
to do on truck brokeridge and other areas of logistics,
nobody has really done that to the same extent. On
the tech enabled logistics or supply chain software side. Certainly
(08:32):
wise tech Descarte and others have been serial acquirers, but
I think you're going to see more XPO like consolidation
strategies applied to the tech enabled and supply chain software side.
Speaker 1 (08:45):
And when you say tech enable software side, can you
talk about you know, companies that might be consolidators.
Speaker 2 (08:53):
And I don't know if.
Speaker 1 (08:56):
There's an obvious company that might be benefit from being
being bought by a larger player.
Speaker 3 (09:02):
Yeah. Well, so I'll give you two examples, one on
the software side, one on the tech enabled service aside.
So software, if you look at and this is one
of the things that came up at the BJSA supply
chain conference, if you look at the last nine years,
if you invested in the S and P five hundred,
you would have made a two hundred and eighty eight
percent return. Great, if you'd invested in Descartes you would
(09:25):
have made almost triple that. You would have made just
under seven hundred percent. And if you invested in wise
Tech you would have made over three thousand percent thirty
one twelve. And so both wise Tech and Discard are
examples of consolidators and supply chain software. To give you
an example, Descartes over the last nine years has bought
(09:48):
something like thirty over thirty companies. Yeah, typically three to
five companies a year every year as they're you know,
incrementally expanding what they do. But really what they have
focused on is global trade management software. So for example,
automating cross border trade, making compliance easier, things like that,
(10:08):
And so that's a good example of a consolidation strategy
and supply chain software. I think you will see that
kind of approach in other areas, whether it's TMS or
analytics and intelligence or a whole host of other areas.
So I think that's the software side on the circuit.
Speaker 1 (10:29):
Can I just ask on the software side, so when
they're buying something, they're just buying something to add to
a speed of what they're offering, or are they getting
into totally different markets When these kind of companies are inquisitive, well.
Speaker 3 (10:42):
In Descartes's case, they mostly focused on doing one thing
really well, which is global trade management, So most of
the acquisitions have had something to do with that, automating
cross border trade or compliance or something like that. Then
there are other companies like in For. In For has
made a string of acquisitions really over the last two decades,
(11:05):
combining TMS and WMS and analytics and a whole host
of other capabilities. So I think you've got both one
which is the deeper strategy, and one which is the
broader strategy. My personal view is you could see winners
on both sides. I would say, the deeper strategy is
illustrated by Descartes has been the one that's been the
(11:27):
most successful in the public markets. But there are plenty
of private equity back companies that have done a broader strategy,
uh In for being example, among others that have done
quite well.
Speaker 2 (11:38):
Gotcha, and then you were you were mentioning on the
services side.
Speaker 3 (11:42):
Yeah, so second would be services. So what would be
a good example tech enabled services? If you think about it,
all the companies that you cover in the in the
public markets, you know, C. H. Robinson, Expediors, et cetera.
You know, those are great services companies. Increasingly, over the
last five years you've seen the emergence of companies, many
(12:05):
times venture backed, that are trying to automate as much
of that as possible. Uh, and that are more tech
enabled versions of those kinds of services companies. Flex Sport
would be a classic examples a tech enabled freight forwarder. Uh,
you know, competing against extraditors and you know some some
have of course done poorly, I mean legendary unfortunately example
(12:29):
like Convoy you know, which failed, But plenty of others
that are succeeding that are tech enabled versions of services. Companies.
I think you will see acquisitions that lead to combinations
in that arena. I'll give you a couple of examples
on the tech enabled freight forwarding front. You know, flexport
has made a series of acquisitions as as they've you know,
(12:51):
broadened their footprint in other areas. Look, I mean you
have tech enabled truck brokers. Uh yeah, tech enabled warehousing
companies companies like Flex and stored and cart dot Com
and others you have, Look, I mean a tech enabled
truck borkridge company. An example would be the Uber Freight business.
(13:15):
For instance, Uber Freate's acquisition of Transplats as a you know,
as a case study, and how they're you know, trying
to expand that. So I think you'll see both of
those groups of companies make more acquisitions.
Speaker 1 (13:26):
This year got youa and I guess, as you know,
because you're you're a banker and an investor, are you
actively looking to buy and consolidate companies?
Speaker 3 (13:39):
So so I spend most of my time focused on
Cambridge Capital and a Cambridge Capital, we have night portfolio companies.
Some of them are outstanding pure organic growth companies. Some
of them are also looking for acquisitions to accelerate beyond that.
So I'll give you a couple of examples. We have
(14:00):
a platform and truck brokeridge called Everest. Everest is in
a very good position to acquire and expand. One reason
why is because they figured out how to create competitive
advantage in a couple of ways, one with technology, but
two with labor. So they actually have a labor base
(14:22):
in Eastern Europe, Poland in Ukraine that allows them to
do several things. One, it gives them more time zone coverage. Two,
it gives them a high quality pool of people who
are loyal. The churt is a lot lower there than
it is here in the US. Also, obviously there's a
(14:45):
cost advantage associated with that. That cost in part leads
to being able to share better price with the customer
as well as have better margin for the company for Everest.
And part of what that means is when Everest acquires
a company, they can automatically give that company higher margin.
That makes them a very good candidate to be a
buyer or merger partner for other US truck brokerage companies.
(15:09):
So Everest is in the middle of executing on that
and talking with multiple companies right now about acquisitions or
mergers that will help them scale up. They be good
for them, but also be good for the companies that
they buy or merge with because they get all those benefits.
So that's one example. Another example would be we have
(15:30):
another platform company called Stat Recovery Services STAT, which is
focused on a niche called audit recovery. It helps brands
reduce the audit and other transportation related fees that they
pay to Walmart and other major retailers. So it turns
(15:51):
out that most transportation people that are listening to this
will know. Most other people will not know what the
acronym otif means. Otiff stands for on time in full. Now,
if you don't deliver on time in full as verified
by the auditors at a retailer like Walmart, you have
(16:11):
to pay fees. Walmart charges over two billion dollars a
year in those fees. Well, Stat Recovery figured out how
to solve that problem and to build a software based
solution for major brands, you know, companies like Craft Highs
and p ANDNG and others, and help them to boost
their compliance, reduce the otiff penalties, and you know, help
(16:36):
those clients make millions of dollars more in bottom line
profit and so stats shot up and has been in
an INK five thousand high growth company for years to
become the leader in that arena. They're also in a
good position to do acquisitions to continue to expand that
and to provide more value. So that's another example of
an area where we are putting our money where I'm
(16:58):
out this and sponsor acquisition. So the short answer, and
then lastly I'll add lee, we're also looking at investing
in new platforms in a variety of areas. So Cambridge Capital,
we're bullish and we're putting more money into these kinds
of ames.
Speaker 2 (17:13):
Got Yeah.
Speaker 1 (17:13):
I mean you're talking a lot about technology, and obviously
technology is very important for supply chains and transportation companies.
You know, what are the biggest innovations in the industry.
Speaker 2 (17:26):
That you see down the road?
Speaker 1 (17:28):
You know, visit AI, autonomous trucking, what's on your radar?
Speaker 3 (17:36):
Yeah, so clearly AI is a huge theme at our conference.
You know, just a few days ago, we have something
called the bjsa supply chain shark tank, and over the
last several years, winners of the shark tank you have
gone under raise hundreds of millions in capital to sell
in some cases to other CEOs in the audience. And
(17:58):
the winner this year was a company using AI to
help automate part of the transportation process called Happy Robot.
What they do is they use AI to basically produce
voice robots. So if you, as a customer, are calling
(18:18):
a truck broker to get a status update, you think
you're talking to a person, but really you're talking to
an AI you know, voice spot and it's it's pretty neat.
They did a demo on the phone that certainly captured
everybody's attention. And I think that's just one illustration of
where AI works in supply chain. You could apply AI
(18:40):
to a lot of areas. The area that I think
is the most interesting is using AI to create superior data,
analytics and intelligence. And we put our money where our
mouth is because we invested in and co founded a
company called green Screens five years ago and green Screens
has grown to become the market leader in using AI
(19:02):
to create predictive pricing in the trucking arena. So if
you're a truck broker, you would use green Screens to
tell you on a real time basis right now at
ten thirty in the morning, how much should it cost
to ship a truckload of freight from New York to Atlanta.
And the reason why green Screens has become the market
leader in that arena, first of all, is because of
(19:24):
an amazing team of engineers. Second of all, all the
data that's been used to train the data model. So
green Screens now processes over thirty billion approaching forty billion
dollars of freight. And the more data you feed it,
the more accurate the system becomes. So, for example, one
of Greenscreens customers, a multi billion dollar logistics company, found
(19:47):
that in comparison with the pricing system that they were
using previously, green Screens cut the error rate by more
than five x. That's a big deal because if you
think about it, pure truck broker, your margin, your gross
margin might be twelve percent. And if the average error
rate with the old system in this case sort of
(20:07):
a de facto standard in the industry, was twenty percent,
that means that most brokers are actively losing money on
a portion of their transactions, but they don't know it
at the time. So green Screens cuts that down. It
allows truck brokers to number one, make decisions faster. Number
two price more accurately. Number three push more decisions to
(20:28):
the front line so they don't have to go up
the chain of command and have multiple people involved. Number
four is a result. Ultimately, the typical broker not only
makes millions more profit, but also can grow without having
to add people. So it's an amazing example of how
AI can create tremendous value and it's the reason why
green Screens now powers more than two hundred the top
(20:49):
three hundred truck brokers. So AI is really an opportunity
to help companies and logistics do things smarter, better and
more profitably.
Speaker 1 (20:59):
And you know, outside of AI, you know, do you
have any thoughts on autonomous vehicles?
Speaker 3 (21:08):
I do? I mean, on the one hand, you know,
I have a friend who described somebody that was well,
I won't name names, but was a member prominent political
family who was running for office. And I asked my
friend what he thought of him, and he said, well,
(21:29):
he's a man who has a lot of potential and
you always will great line, right, So you know, you
wonder whether autonomous is one of those areas that has
a lot of potential that never gets fully fulfilled or not.
I happen to be optimistic because we're seeing autonomous work
(21:49):
in certain areas already, right. We see it work for
long haul, right, and if you're doing long haul trucking,
not going to do the first while on the last mile,
but the part that's on ninety five or you know,
or another you know long call highway stretch that can
be done on an autonomous basis today. And then similarly,
if you look at trucks that are operated in places
(22:09):
that don't have people, like, for instance, trucks that operate
in underground mines in Australia, you know those are autonomous today.
So some of this is already happening. But I think
the hard part is areas where there's high density of
population first mile, last mile, major cities, etc. That's taken
much longer than people originally predicted, and I think it
(22:31):
will continue to be a tough met to solve. But
in the right applications, the right niches, it's definitely it's
definitely real. The problem is an investor is it's hard
for you to invest in autonomous and make money because
the failure rate is high. It's likely to be a
winner take all market where you know, one company comes
(22:54):
to dominate. So if there were fifty companies and you
invested in forty of them, you might there's money and
all of them unless you pick the winner. So for
as a consumer, it's great. I can't wait to see
autonomous come and I'm you know, certainly encouraging that. As
an investor, we have not invested in anything autonomous because
it's just really hard to know who the one big
(23:15):
winner is going to be.
Speaker 1 (23:16):
Do you see technology, like any technology that are out
there making parts of supply chain obsolete or companies obsolete.
Speaker 3 (23:24):
Definitely. So look, one good example is in the area
of in the area of truck brokerage. I don't believe
technology will make the brokers obsolete, but I do believe
technology is massively reducing the headcount needed right and streamlining
(23:47):
the process. So you know, it might be that the
truck broker of twenty thirty does the same level of
revenue as the company of today, but with half the headcount.
As an example, similarly, I mean there are jobs, like,
you know, people that make phone calls for the check
call function, you know, calling to see where are things well,
(24:09):
you know, happy robot illustration shows how that function should
probably just be automated by by the way, I mean
it could be automated with technology if you have tracking
on the vehicles, or it could be automated because you're
using an AI chatbot. But either way, I think certain
functions will be automated and will go away. On the
other hand, I don't see entire industries. I mean, like
(24:32):
there are some people that have said there's some Silicon Valley,
you know, startups that said, oh, my startup's going to
put the truck proker in a business. I don't think
that's happening any time soon, but it will certainly massively
reduce workflow. I'm just curious.
Speaker 1 (24:47):
I don't know if you remember this, but during the
conference in your shark tank the Happy Robot Company, what
kind of accent did the broker have?
Speaker 2 (24:54):
Did they sound like from the south or an english woman?
Speaker 3 (24:58):
Like? What was the accent? Well, it was funny. The
the accent was fairly neutral. But but just to give
you a sense of of the you know, the real
time give and take the you know, the co founder
of the of the company who's who's doing the demo's
name is Pablo, And in the middle of his questioning, uh,
you know, where's the truck what's happening? He said, By
(25:19):
the way, what's your name? My name is Pablo, and
the and the the chatbots said, oh, my name is
Pablo too. So look, I mean it's uh you could
train a voice uh chatbot to do anything, right. You
could give it a Southern accent or an Indian accent,
or a French accent or whatever you want. But but
I think you'll see most of these are they're kind
(25:41):
of like PBX voice systems, you know, they're they're trained
on on neutral accents. Right.
Speaker 1 (25:47):
So you know, earlier in the conversation we talked about
M and A, you know, but we didn't talk about valuations,
and that's always an important part. You know, what what
evaluations look like right now relative through his historical measures.
Speaker 3 (26:01):
Well, I think they're they're lower than they were during
peak COVID, they're higher than they were prior to COVID,
and I think that's some level of balance in between.
So I'll give you an example. If you took a
ten to twenty million dollar EBITA asset light logistics company,
a truck brokeridge or freight forward in company twenty years ago,
(26:22):
on average, that company might have traded for five times ebatah.
Ten years ago, a company might have traded for seven
times ebatah, eight times ebatah again just on average. You know,
plenty of examples higher and lower. During peak COVID, when
everything was scarce and growth shot up, you know, multiples
(26:47):
went up, and they went up on inflated ebata So
that same company might have traded for you know, thirteen
times in twenty twenty one, and today that company might
trade back at at somewhere closer to the you know,
twenty fifteen, sixteen seventeen range, maybe a little bit higher,
you know, like eight times or so again as an average.
(27:08):
Of course, the problem is deals only happen when buyers
and sellers agree on a price, right, you've got to
have a zone of agreement. The sellers who remembered inflated
multiples off of inflated EBITDA in twenty one, you know,
say why would I transact now? I mean, if your
EBITDA was double what it might have otherwise been, and
(27:30):
the multiples double what it might have otherwise been, there
was a brief window of about a year where you
could have gotten four times the money that you might
have otherwise gotten for the business. But you know, memories
tend to be sticky and selective, and so if you
remembered that you could get four times more money in
twenty one, why would you take what you perceive as
(27:52):
a seventy five percent discount today? Even though it's not
really a discount, it's more of a regression to the mean,
and so it's taken a while for buyer and seller
expectations to reset. I think that's what a lot of
what happened in twenty twenty four. But I think we've
reached that level of alignment, which is why we're starting
to see such a surgeon deal activity. And examples like
(28:14):
some of the ones that I mentioned, the Shanker deal,
the Coyote deal, illustrate the fact that a lot of
large buyers and sellers have finally come to some consensus
around what's.
Speaker 1 (28:24):
Fair right and inflated multiples probably led to inflated egos
of some of the selling companies. So you know, in trucking,
a seller is usually motivated because it's a family business
and no one wanted in the family wants to continue.
What motivates most of the sellers that you are involved with, well, I.
Speaker 3 (28:45):
Think there are a few scenarios. I think one scenario
is it's a founder who's built something great but wants
to do something different. It's the life transition, right, So
maybe it's an age and stage. You know, worked hard,
built the business, want to step back and retire, or
want to go start something different, or want to make
a different life choice. I mean, as an example, one
(29:09):
of the great CEOs that I worked with earlier in
my career was Lewis D. Joy. Lewis to Joy built
New Breed, grew it over the course of two decades
to over six hundred million dollar value company, and then
he sold to XPO in twenty fifteen. Because you want
to do something totally different. That totally different thing was
going into government and public policy and public service and
(29:30):
he's now the Postmaster General and so look, not everybody
gets to do that. But it's a good illustration to
the point, which is sometimes people get to a stage
where it's like, all right, I'm ready for something different.
The second reason is sometimes seller gets to the point
where here she says, you know what, my business is good,
(29:51):
but I'm in an industry where there's consolidation, and if
I'm whatever running one hundred million dollar truck brokerage business,
but I'm competing against multi billion dollar giants. I got
to be a part of something bigger. And so that
owner might say, I'm going to sell or merge with
another company in order to be a part of something bigger.
And that's certainly part of what happened with XPO. It's
(30:13):
part of what we're seeing and doing with Everest. It's
a good example where where CEOs or owners of companies,
it's not like they're cashing out because they're done and
they're retired. It's because they recognize that they will have
a stronger, better combined business if they sell or merge
into a consolidator. And I think that's important. And then look,
(30:35):
I think there are also, you know, third scenarios where
people realize I mean, as my friend Hurbsheer likes to say,
most people who own their business think it's an heirloom, right,
I'm going to pass it on for generations. But then
when they look at it more closely, they realize, no,
it's an asset. And so an heirloom is something you
keep forever, but an asset is something that you could sell, right.
(30:56):
I mean, if you've built a great business and you're
thinking what do I do for kids? You know, maybe
your kids don't want to be in the logistics world, right,
and maybe they're passionate something else, and maybe, you know,
sell the business and giving them money and freedom and
choice to do whatever they want is, you know, is
better for you and better for them. So I think
all those are factors that play into it. But ultimately,
(31:19):
and I guess lastly, there's one fourth thing that I'll mention,
which is market market conditions, including tax Right now, we're
in an ecosystem where the tax rates which were lowered
in twenty seventeen are set to expire at the end
of this year. Now we'll probably be extended in some
(31:40):
form because the Trump administration wants to, and there's a
Republican Senate, Republican Congress that supports that as well, But
you don't know. I think one thing that's clear is
this is an unpredictable climate. And so you know, if
somebody who's built a business and wants to sell and
do so under you know, favorable market conditions or tax regimes,
certainly that that's an important consideration as well. So I'd
(32:02):
say those are four profiles and factors.
Speaker 1 (32:05):
Yeah, and you mentioned you know that the M and
A market is poised to heat up this year.
Speaker 2 (32:12):
How about the IPO market.
Speaker 1 (32:13):
Are there any large private companies that you know that
are on your radar that might go public or talked
about going to public. Do you think that that market's
going to heat up as well in twenty twenty five?
Speaker 3 (32:23):
Yeah, yeah, I do. On the on the classic logistics side,
there are some major companies, some terrific companies that are
poised to go public. Keen An Advantage would be one example,
and they're certainly in a position where they're big enough
and yeah, high quality business that I would expect should
(32:47):
go public this year. Worldwide Express would be another another,
you know, act light consolidator in the logistics arena. And
then on the software side and tech enabled services side,
ship Bob is a candidate to do so in e commerce, fulfillment,
software and take enabled services. So look, I think there
are a number of companies in the supply chain world
(33:09):
that are poised to go public in the next couple
of quarters.
Speaker 2 (33:13):
Right, and does does BGSA do they?
Speaker 3 (33:16):
You guys?
Speaker 2 (33:17):
Do I pos as well?
Speaker 3 (33:18):
BGSA does full service investment banking, so you know, certainly
can help on yet that and all the above, Most
of what BGSA has done historically has been M and
A and you know, private capital markets activity for the
simple reason that if you think about the logistics industry,
you know, something like ninety nine percent of all logistics
(33:40):
companies are private. But yes, we've certainly done plenty of
work on the public side as well as the private side,
and I think there's there's plenty of opportunity there.
Speaker 1 (33:49):
You know, when I was reading through your bio, you
know you had in there that you know, you started
transportation working for a family business. Did you know, as
like you knows as a fourteen year old kid that
you were going to go into your family's business, And
maybe you can talk about, you know, exactly what kind
of business that was.
Speaker 3 (34:07):
You know. I remember watching an interview with a college
basketball coach from small school who made it into the NBA,
excuse me, the NCAA sweet sixteen, and somebody asked him,
in your wildest dreams, did you think this would happen?
And he said, sudden, my wildest dreams are not about basketball.
So my dreams as a fourteen year old boy were
(34:30):
not about logistics. Good, but I did have exposure to
the industry early on, and a turning point for me was,
you know, look, when I was in college, I worked
for a you know, summer job in Ami and the
you know, truck leasing business, and yeah, struve to be
the you know, first and last out work you know hard,
(34:51):
worked on opening a new market in Baltimore and a
couple of other things. And what struck me was it
was an interesting business, it was growing, and it was Look,
there are some businesses where there's an incredible amount of
things that have to go right in order for you
to succeed, like, for example, biotech. You know, if you're
(35:12):
in the biotech world, you could spend a decade of
your life working on a drug and spend over a
billion dollars, you know, trying to go through the FD
approval process, and then in the end it might fail.
You'd say, well, wow, I just wasted ten years of
my life for nothing because there's this high data. On
the other hand, if you get it right and you're
the next you know, maderta amazing. But what struck me
(35:35):
was in the logistics arena, if you work hard and
you're disciplined and your focus, you could be successful. And
there's sure I mean, there are lots of areas of
innovation in areas of risk, but I just saw a
pretty linear path to success there. And so when I
went into strategy consulting, I looked for opportunities to work
(35:57):
in the transportation arena. So I worked at Extra Trailer
Leasing was one of our clients, and you know, I
remember studying companies like C. Trobinson and Hub Group and saying, hey,
this is something that's taking off. It's really going to
be successful. And of course that was you know, in
the nineties, in the early days of the explosion of
outsourcing and asset light logistics, and so, you know, I
(36:20):
made the decision when I was in business school. I
was watching all these amazing startups in the internet arena.
There's a guy named Dave Perry who built something called Kendex.
It was the first B to B exchange, and in
his case, it was automating the chemical industry. And I thought,
wouldn't it be great if I could apply what he's
doing in the transportation world. And that's really what led
me to start Threeplex over twenty five years ago, and
(36:45):
here I am today. So that's how it really it started.
Speaker 1 (36:48):
For me and what is you know, you've kind of
built two very successful financial institutions.
Speaker 2 (36:55):
You know what's your favorite part of your job?
Speaker 3 (36:59):
I mean, for me, it's the opportunity to work with
great people in supportive innovation to build amazing things. Green
Streine is a really good example. I mean, when I
first met Felix, who is you know, really the founder
behind the business. You know, they had amazing technology, they
(37:20):
had some great ideas, but they were doing too much
and so you know, we had a conversation around focus
and well, what's the one thing that matters the most. Well,
the one thing that matters the most was using AI
to solve the problem of predictive pricing. And so the
whole thought process, the innovation, the creativity around saying, hey,
there are all these great things you could do and
(37:40):
all these great capabilities. Let's pick the best one. Then
let's figure out a path to turning that into something
much bigger. Who are the perfect customers and you know,
talking to companies like NFI and Werner and a host
of others, and who are the perfect people and talking
to outstanding people with experience and the transportation and tech arena,
(38:02):
you know, like Don Salvucci Fabia who became the CEO,
and it's done an amazing job, and what's the big
market opportunity and how to focus on that and then
partner with others in areas that are adjacent to that,
and then ultimately seeing all that strategic and creative work
turning into something that really blossoms. I mean that's really rewarding.
(38:24):
And it's rewarding because when you first of all work
with other people that have big dreams, and then you
can help those dreams come to life and then put
resources behind them and then have that translate into something
that really makes a difference for companies and customers for
the industry. I mean, I think that's fantastic, and it's intense,
(38:46):
and there's of course a massive amount of work, but
I mean in the end, having a dream and then
doing the work to put it into reality in partnership
with other great people is really rewarding.
Speaker 1 (38:58):
And I always like to ask the guests on the
Talking Transport podcast, you know about books that they've read,
whether it's on leadership, investing or transportation that's kind of
close to your heart.
Speaker 3 (39:10):
Absolutely So in my office, I organize the library by
theme and so seven feet to my left. I have
the shelf of biographies. And if I look at the
great biographies that I read and draw inspiration from, I
mean there's Type by Ron Churno, which is the story
of how Rockefeller built his empire. Of course, all the
(39:30):
Walter Isaacson books, including Elon Musk, Steve Jobs, and a
host of others. There's the Ben Franklin biography as well
that Isaacson wrote, Coolidge, et cetera. But a couple of things,
and then of course the the Winston Churchill biography by
Paul Johnson. What I love about biographies is if you
(39:54):
can get the accumulated wisdom of other people who have
accomplished great things over seven eighty ninety years of life,
and you know you read the book in a day
and capture all that wisdom. How amazing is that? And so,
But just to give you an example, I mean the
Paul Johnson biography of Winston Churchill. People know Churchill as
(40:16):
the great statesman who rallied Britain during World War Two,
but the truth is Churchill had some real low points.
For example, he was responsible for leading his men into
a calamitous battle in World War One that that of
course led to many of his trips being killed. It
could have been the end of his career. But what
(40:40):
did he do. He basically, he retreated, he reflected, he
wrote books, he thought, you know, and he came back bigger,
better and stronger. And look, we've all had our setbacks.
I certainly have. But you know, the idea that the
greatest leaders of the last century went through a hero's
journey of failure before getting to success. For me, he's
(41:03):
remotivating because during the times when things aren't going the
right way, and that happens all the time, it's great
to draw on that for strength. And so while this
might not be the transportation book that you're expecting, I
think learning from people like the Church biography for me
has been pretty powerful.
Speaker 2 (41:22):
No, that's great, that's great. You know I've read that
one too.
Speaker 1 (41:27):
That's it's very interesting journey that his life slash political
career took.
Speaker 2 (41:34):
Well, Ben, I really want to thank you for your time.
This is a great conversation, Lee.
Speaker 3 (41:38):
Thank You're great talking with you. Really enjoyed it and
appreciate all the great work that you're doing at Bloomberg Intelligence.
Thanks so much.
Speaker 1 (41:45):
And I don't want to thank you for tuning in.
If you liked the episode, please subscribe and leave a review.
We've lined up a number of great guests for the podcast,
so please check back to hear conversations with C suite executives, shippers, regulators,
and decision makers within the freight market. Also, if you
have an idea for a future episode, please hit me
up on the terminal or on Twitter at logistics Lee.
(42:06):
Thanks so much everyone, and have a great day.
Hi everyone, this is Lee Clasgow when We're Talking Transports.
Welcome to Bloomberg Intelligence Talking Transport Podcast. I'm your host,
Lee Claskow, Senior free transportation Logistics Analysts at Bloomberg Intelligence,
Bloomberg's in house research arm of almost five hundred analysts
and strategists around the globe. Before diving in little public
service announcement. Your support is instrumental to keep bringing great
(00:29):
guests onto the podcast like the one we have today.
If you haven't already, please do take a moment to
follow rate and share the Talking Transports podcast with your family, friends,
and colleagues. We really appreciate your support.
Speaker 2 (00:42):
Today.
Speaker 1 (00:42):
I'm very excited to have Benjamin Gordon with us. He's
the founder of BGSA Holdings and Cambridge Capital. Ben draws
on a career spent investing in advising and building supply
chain and technology companies. At BGSA Holdings, he led the
firm's efforts advising on over one billion worth of supply
chain transactions. Prior to BGSA Holdings, Ben founded three Plex,
(01:06):
the internet solution enabling third party logistics companies to automate
their businesses. Three Plex was later acquired by Bersk Prior
to three Plex, Ben advised transportation logistics clients at Mercer
Management Consulting, and prior to Mercer, Ben worked in his
family's transportation business AMI, where he helped the company expand
(01:28):
its logistics operation. He received a master's in Business administration
from Harvard Business School and a Bachelor of Arts degree
from Yale. Ben, thanks for joining us on the podcast.
Thanks so much for being here.
Speaker 3 (01:41):
Thanks Ley, great to be with you again.
Speaker 1 (01:44):
And you know Cambridge Capital BGSA. I know them well,
but maybe not a household name for our listeners. Can
you tell us a little about the organizations that you founded?
Speaker 3 (01:53):
Sure, glad to so. BGSA is an investment bank. I
started it in two thousand and two after we saw
three Plex, the SAASTMS company that you mentioned. The reason
I started it was I had all these investment bankers
calling on me when I was running my logistics software company,
three Plex, and most of them didn't really understand the
(02:14):
business as well as we did. Now, maybe that's to
be expected, because an operator should know is business better
than somebody on the outside. But I thought there was
an opportunity to build an investment bank that could provide
M and A and advisory services for CEOs of logistics
and supply chain companies based on deep domain expertise and
(02:35):
over the course of twenty two twenty three years done
over fifty M and A transactions. We've worked with lots
of top companies giants like ups, FED, XDHL, Quintin, Augleshanker, Panel, PENA,
NFI and many others, and that business continues and continues
(02:55):
to work with lots of trific companies in supply chain.
Cambridge Capital is the private equity firm that we started
in twenty ten. Cambridge invests in outstanding logistics and supply
chain companies and the premise there is use what we
know as operators and investors to pick great people, building
(03:18):
great companies and then bring them extra resources to help
them scale up faster. The model at Cambridge is invest
both growth equity and buyout capital in terrific businesses. We
had the great fortune of meeting Brad Jacobs and being
an original investor with Brad in XPO back in twenty eleven.
(03:40):
We've invested in a number of companies since then's day.
We've got a portfolio of nine companies across multiple areas
of the supply chain sector and so on the BJSA side,
provide advice on the Cambridge Capital side, put our money
where our mouth is and get involved in supporting great
people building great businesses.
Speaker 1 (04:00):
Sounds like that keeps you extremely extremely busy. Now I
know BGSA they hold a big conference every January down
in Florida, so we're just coming off of that. Can
you talk about the takeaways from the conference?
Speaker 3 (04:15):
Sure? Absolutely so. This is our nineteenth annual BJSA Supply
Chain CEO conference and biggest and best yet. We had
three hundred and eighty CEOs and other supply chain leaders
here in Palm Beach at the Breakers apparently the epicenter
of the universe now given the proxity tomorrow Lago, So
a lot of people here and a few interesting takeaways.
(04:39):
First of all, the level of bullishness enthusiasm, I would
say is exceptionally high. One way to measure that is
we actually survey the CEOs and attendees that join us
and question that. We asked, what was the growth for
your company last year and what do you expect for
this year? And more than seventy percent expect over ten
(05:04):
percent growth this year, which is noteworthy certainly, you know,
looking at the public comps. That means much stronger growth
than what the past year produced for the sector. And
then a second data point is we ask people about
their appetite for M and A both in terms of
their opinion. So we ask what level of M and
(05:26):
A activity do you expect for the industry this year?
And then we also ask how likely are you to
consider doing something mergor acquisition, investment, or otherwise. About seventy
three percent expect more M and A activity in the
industry this year, and more than seventy percent say they
are either very likely or somewhat likely to do something
(05:48):
themselves this year. So I think that tells you something
about both overall industry enthusiasm and bollishness after a long,
deep record freight recession. It also tells you something about
the appetite for M and A and deal activity.
Speaker 2 (06:05):
And you know, when.
Speaker 1 (06:07):
Talking about appetite for more deals this year, are there
any sub sectors that you know you think that are
more ripe than others for transactions?
Speaker 3 (06:17):
Yeah, definitely. So I mean, first of all, let me
address that in two ways. First of all, thematically, Okay,
So thematically, I mean there's lots of M and A activity.
But I would highlight three areas in particular. One is divestitures,
where big companies are shedding what they perceive as non
(06:38):
core assets. So an example would be UPS selling the
Coyugi Logistics division to RXO to get out of the
truck broke region to focus on the core parcel and
an e commerce logistics business. Similarly FedEx spinning off FedEx Freight,
h Robinson selling it to European division to Sender, Marist
divesting Sply Chain Service you know as well. So divestitures
(07:01):
I think are one theme, particularly for public companies. Second
is consolidation. Guys that are great at one thing, they're saying,
let me do more of it. A great example would
be DSB buying Schenker for fourteen billion, the RXO deal,
RXO buying Coyote. It was a divestiture for UPS, it
was a consolidation for RXO, Wistech buying a string of companies,
(07:25):
and Global Trade Management, so those are all consolidators. And
then a third theme would be specialists, people that are
saying I'm going to go deeper in niche areas. For instance,
in reverse logistics, DHL bought inmar which followed on moves
that FedEx and UPS had made in the reverse logistics arena,
UPS going deeper in colt Chaine buying vpl and frigotrons.
(07:49):
And so I think all three of those themes, divestitures,
consolidation and specialists, those are all things that we're going
to see a lot more of. The Other thing that
I would add is I think you will see more
M and A from a sector standpoint in a variety
of fragmented areas. Truck brokerage certainly an obvious one, you know,
(08:09):
freight forwarding, warehousing, etc. But interestingly, one of the things
that I learned from watching Brad Jacobs, Brad took a
fragmented market and consolidated. Even though there's still much more
to do on truck brokeridge and other areas of logistics,
nobody has really done that to the same extent. On
the tech enabled logistics or supply chain software side. Certainly
(08:32):
wise tech Descarte and others have been serial acquirers, but
I think you're going to see more XPO like consolidation
strategies applied to the tech enabled and supply chain software side.
Speaker 1 (08:45):
And when you say tech enable software side, can you
talk about you know, companies that might be consolidators.
Speaker 2 (08:53):
And I don't know if.
Speaker 1 (08:56):
There's an obvious company that might be benefit from being
being bought by a larger player.
Speaker 3 (09:02):
Yeah. Well, so I'll give you two examples, one on
the software side, one on the tech enabled service aside.
So software, if you look at and this is one
of the things that came up at the BJSA supply
chain conference, if you look at the last nine years,
if you invested in the S and P five hundred,
you would have made a two hundred and eighty eight
percent return. Great, if you'd invested in Descartes you would
(09:25):
have made almost triple that. You would have made just
under seven hundred percent. And if you invested in wise
Tech you would have made over three thousand percent thirty
one twelve. And so both wise Tech and Discard are
examples of consolidators and supply chain software. To give you
an example, Descartes over the last nine years has bought
(09:48):
something like thirty over thirty companies. Yeah, typically three to
five companies a year every year as they're you know,
incrementally expanding what they do. But really what they have
focused on is global trade management software. So for example,
automating cross border trade, making compliance easier, things like that,
(10:08):
And so that's a good example of a consolidation strategy
and supply chain software. I think you will see that
kind of approach in other areas, whether it's TMS or
analytics and intelligence or a whole host of other areas.
So I think that's the software side on the circuit.
Speaker 1 (10:29):
Can I just ask on the software side, so when
they're buying something, they're just buying something to add to
a speed of what they're offering, or are they getting
into totally different markets When these kind of companies are inquisitive, well.
Speaker 3 (10:42):
In Descartes's case, they mostly focused on doing one thing
really well, which is global trade management, So most of
the acquisitions have had something to do with that, automating
cross border trade or compliance or something like that. Then
there are other companies like in For. In For has
made a string of acquisitions really over the last two decades,
(11:05):
combining TMS and WMS and analytics and a whole host
of other capabilities. So I think you've got both one
which is the deeper strategy, and one which is the
broader strategy. My personal view is you could see winners
on both sides. I would say, the deeper strategy is
illustrated by Descartes has been the one that's been the
(11:27):
most successful in the public markets. But there are plenty
of private equity back companies that have done a broader strategy,
uh In for being example, among others that have done
quite well.
Speaker 2 (11:38):
Gotcha, and then you were you were mentioning on the
services side.
Speaker 3 (11:42):
Yeah, so second would be services. So what would be
a good example tech enabled services? If you think about it,
all the companies that you cover in the in the
public markets, you know, C. H. Robinson, Expediors, et cetera.
You know, those are great services companies. Increasingly, over the
last five years you've seen the emergence of companies, many
(12:05):
times venture backed, that are trying to automate as much
of that as possible. Uh, and that are more tech
enabled versions of those kinds of services companies. Flex Sport
would be a classic examples a tech enabled freight forwarder. Uh,
you know, competing against extraditors and you know some some
have of course done poorly, I mean legendary unfortunately example
(12:29):
like Convoy you know, which failed, But plenty of others
that are succeeding that are tech enabled versions of services. Companies.
I think you will see acquisitions that lead to combinations
in that arena. I'll give you a couple of examples
on the tech enabled freight forwarding front. You know, flexport
has made a series of acquisitions as as they've you know,
(12:51):
broadened their footprint in other areas. Look, I mean you
have tech enabled truck brokers. Uh yeah, tech enabled warehousing
companies companies like Flex and stored and cart dot Com
and others you have, Look, I mean a tech enabled
truck borkridge company. An example would be the Uber Freight business.
(13:15):
For instance, Uber Freate's acquisition of Transplats as a you know,
as a case study, and how they're you know, trying
to expand that. So I think you'll see both of
those groups of companies make more acquisitions.
Speaker 1 (13:26):
This year got youa and I guess, as you know,
because you're you're a banker and an investor, are you
actively looking to buy and consolidate companies?
Speaker 3 (13:39):
So so I spend most of my time focused on
Cambridge Capital and a Cambridge Capital, we have night portfolio companies.
Some of them are outstanding pure organic growth companies. Some
of them are also looking for acquisitions to accelerate beyond that.
So I'll give you a couple of examples. We have
(14:00):
a platform and truck brokeridge called Everest. Everest is in
a very good position to acquire and expand. One reason
why is because they figured out how to create competitive
advantage in a couple of ways, one with technology, but
two with labor. So they actually have a labor base
(14:22):
in Eastern Europe, Poland in Ukraine that allows them to
do several things. One, it gives them more time zone coverage. Two,
it gives them a high quality pool of people who
are loyal. The churt is a lot lower there than
it is here in the US. Also, obviously there's a
(14:45):
cost advantage associated with that. That cost in part leads
to being able to share better price with the customer
as well as have better margin for the company for Everest.
And part of what that means is when Everest acquires
a company, they can automatically give that company higher margin.
That makes them a very good candidate to be a
buyer or merger partner for other US truck brokerage companies.
(15:09):
So Everest is in the middle of executing on that
and talking with multiple companies right now about acquisitions or
mergers that will help them scale up. They be good
for them, but also be good for the companies that
they buy or merge with because they get all those benefits.
So that's one example. Another example would be we have
(15:30):
another platform company called Stat Recovery Services STAT, which is
focused on a niche called audit recovery. It helps brands
reduce the audit and other transportation related fees that they
pay to Walmart and other major retailers. So it turns
(15:51):
out that most transportation people that are listening to this
will know. Most other people will not know what the
acronym otif means. Otiff stands for on time in full. Now,
if you don't deliver on time in full as verified
by the auditors at a retailer like Walmart, you have
(16:11):
to pay fees. Walmart charges over two billion dollars a
year in those fees. Well, Stat Recovery figured out how
to solve that problem and to build a software based
solution for major brands, you know, companies like Craft Highs
and p ANDNG and others, and help them to boost
their compliance, reduce the otiff penalties, and you know, help
(16:36):
those clients make millions of dollars more in bottom line
profit and so stats shot up and has been in
an INK five thousand high growth company for years to
become the leader in that arena. They're also in a
good position to do acquisitions to continue to expand that
and to provide more value. So that's another example of
an area where we are putting our money where I'm
(16:58):
out this and sponsor acquisition. So the short answer, and
then lastly I'll add lee, we're also looking at investing
in new platforms in a variety of areas. So Cambridge Capital,
we're bullish and we're putting more money into these kinds
of ames.
Speaker 2 (17:13):
Got Yeah.
Speaker 1 (17:13):
I mean you're talking a lot about technology, and obviously
technology is very important for supply chains and transportation companies.
You know, what are the biggest innovations in the industry.
Speaker 2 (17:26):
That you see down the road?
Speaker 1 (17:28):
You know, visit AI, autonomous trucking, what's on your radar?
Speaker 3 (17:36):
Yeah, so clearly AI is a huge theme at our conference.
You know, just a few days ago, we have something
called the bjsa supply chain shark tank, and over the
last several years, winners of the shark tank you have
gone under raise hundreds of millions in capital to sell
in some cases to other CEOs in the audience. And
(17:58):
the winner this year was a company using AI to
help automate part of the transportation process called Happy Robot.
What they do is they use AI to basically produce
voice robots. So if you, as a customer, are calling
(18:18):
a truck broker to get a status update, you think
you're talking to a person, but really you're talking to
an AI you know, voice spot and it's it's pretty neat.
They did a demo on the phone that certainly captured
everybody's attention. And I think that's just one illustration of
where AI works in supply chain. You could apply AI
(18:40):
to a lot of areas. The area that I think
is the most interesting is using AI to create superior data,
analytics and intelligence. And we put our money where our
mouth is because we invested in and co founded a
company called green Screens five years ago and green Screens
has grown to become the market leader in using AI
(19:02):
to create predictive pricing in the trucking arena. So if
you're a truck broker, you would use green Screens to
tell you on a real time basis right now at
ten thirty in the morning, how much should it cost
to ship a truckload of freight from New York to Atlanta.
And the reason why green Screens has become the market
leader in that arena, first of all, is because of
(19:24):
an amazing team of engineers. Second of all, all the
data that's been used to train the data model. So
green Screens now processes over thirty billion approaching forty billion
dollars of freight. And the more data you feed it,
the more accurate the system becomes. So, for example, one
of Greenscreens customers, a multi billion dollar logistics company, found
(19:47):
that in comparison with the pricing system that they were
using previously, green Screens cut the error rate by more
than five x. That's a big deal because if you
think about it, pure truck broker, your margin, your gross
margin might be twelve percent. And if the average error
rate with the old system in this case sort of
(20:07):
a de facto standard in the industry, was twenty percent,
that means that most brokers are actively losing money on
a portion of their transactions, but they don't know it
at the time. So green Screens cuts that down. It
allows truck brokers to number one, make decisions faster. Number
two price more accurately. Number three push more decisions to
(20:28):
the front line so they don't have to go up
the chain of command and have multiple people involved. Number
four is a result. Ultimately, the typical broker not only
makes millions more profit, but also can grow without having
to add people. So it's an amazing example of how
AI can create tremendous value and it's the reason why
green Screens now powers more than two hundred the top
(20:49):
three hundred truck brokers. So AI is really an opportunity
to help companies and logistics do things smarter, better and
more profitably.
Speaker 1 (20:59):
And you know, outside of AI, you know, do you
have any thoughts on autonomous vehicles?
Speaker 3 (21:08):
I do? I mean, on the one hand, you know,
I have a friend who described somebody that was well,
I won't name names, but was a member prominent political
family who was running for office. And I asked my
friend what he thought of him, and he said, well,
(21:29):
he's a man who has a lot of potential and
you always will great line, right, So you know, you
wonder whether autonomous is one of those areas that has
a lot of potential that never gets fully fulfilled or not.
I happen to be optimistic because we're seeing autonomous work
(21:49):
in certain areas already, right. We see it work for
long haul, right, and if you're doing long haul trucking,
not going to do the first while on the last mile,
but the part that's on ninety five or you know,
or another you know long call highway stretch that can
be done on an autonomous basis today. And then similarly,
if you look at trucks that are operated in places
(22:09):
that don't have people, like, for instance, trucks that operate
in underground mines in Australia, you know those are autonomous today.
So some of this is already happening. But I think
the hard part is areas where there's high density of
population first mile, last mile, major cities, etc. That's taken
much longer than people originally predicted, and I think it
(22:31):
will continue to be a tough met to solve. But
in the right applications, the right niches, it's definitely it's
definitely real. The problem is an investor is it's hard
for you to invest in autonomous and make money because
the failure rate is high. It's likely to be a
winner take all market where you know, one company comes
(22:54):
to dominate. So if there were fifty companies and you
invested in forty of them, you might there's money and
all of them unless you pick the winner. So for
as a consumer, it's great. I can't wait to see
autonomous come and I'm you know, certainly encouraging that. As
an investor, we have not invested in anything autonomous because
it's just really hard to know who the one big
(23:15):
winner is going to be.
Speaker 1 (23:16):
Do you see technology, like any technology that are out
there making parts of supply chain obsolete or companies obsolete.
Speaker 3 (23:24):
Definitely. So look, one good example is in the area
of in the area of truck brokerage. I don't believe
technology will make the brokers obsolete, but I do believe
technology is massively reducing the headcount needed right and streamlining
(23:47):
the process. So you know, it might be that the
truck broker of twenty thirty does the same level of
revenue as the company of today, but with half the headcount.
As an example, similarly, I mean there are jobs, like,
you know, people that make phone calls for the check
call function, you know, calling to see where are things well,
(24:09):
you know, happy robot illustration shows how that function should
probably just be automated by by the way, I mean
it could be automated with technology if you have tracking
on the vehicles, or it could be automated because you're
using an AI chatbot. But either way, I think certain
functions will be automated and will go away. On the
other hand, I don't see entire industries. I mean, like
(24:32):
there are some people that have said there's some Silicon Valley,
you know, startups that said, oh, my startup's going to
put the truck proker in a business. I don't think
that's happening any time soon, but it will certainly massively
reduce workflow. I'm just curious.
Speaker 1 (24:47):
I don't know if you remember this, but during the
conference in your shark tank the Happy Robot Company, what
kind of accent did the broker have?
Speaker 2 (24:54):
Did they sound like from the south or an english woman?
Speaker 3 (24:58):
Like? What was the accent? Well, it was funny. The
the accent was fairly neutral. But but just to give
you a sense of of the you know, the real
time give and take the you know, the co founder
of the of the company who's who's doing the demo's
name is Pablo, And in the middle of his questioning, uh,
you know, where's the truck what's happening? He said, By
(25:19):
the way, what's your name? My name is Pablo, and
the and the the chatbots said, oh, my name is
Pablo too. So look, I mean it's uh you could
train a voice uh chatbot to do anything, right. You
could give it a Southern accent or an Indian accent,
or a French accent or whatever you want. But but
I think you'll see most of these are they're kind
(25:41):
of like PBX voice systems, you know, they're they're trained
on on neutral accents. Right.
Speaker 1 (25:47):
So you know, earlier in the conversation we talked about
M and A, you know, but we didn't talk about valuations,
and that's always an important part. You know, what what
evaluations look like right now relative through his historical measures.
Speaker 3 (26:01):
Well, I think they're they're lower than they were during
peak COVID, they're higher than they were prior to COVID,
and I think that's some level of balance in between.
So I'll give you an example. If you took a
ten to twenty million dollar EBITA asset light logistics company,
a truck brokeridge or freight forward in company twenty years ago,
(26:22):
on average, that company might have traded for five times ebatah.
Ten years ago, a company might have traded for seven
times ebatah, eight times ebatah again just on average. You know,
plenty of examples higher and lower. During peak COVID, when
everything was scarce and growth shot up, you know, multiples
(26:47):
went up, and they went up on inflated ebata So
that same company might have traded for you know, thirteen
times in twenty twenty one, and today that company might
trade back at at somewhere closer to the you know,
twenty fifteen, sixteen seventeen range, maybe a little bit higher,
you know, like eight times or so again as an average.
(27:08):
Of course, the problem is deals only happen when buyers
and sellers agree on a price, right, you've got to
have a zone of agreement. The sellers who remembered inflated
multiples off of inflated EBITDA in twenty one, you know,
say why would I transact now? I mean, if your
EBITDA was double what it might have otherwise been, and
(27:30):
the multiples double what it might have otherwise been, there
was a brief window of about a year where you
could have gotten four times the money that you might
have otherwise gotten for the business. But you know, memories
tend to be sticky and selective, and so if you
remembered that you could get four times more money in
twenty one, why would you take what you perceive as
(27:52):
a seventy five percent discount today? Even though it's not
really a discount, it's more of a regression to the mean,
and so it's taken a while for buyer and seller
expectations to reset. I think that's what a lot of
what happened in twenty twenty four. But I think we've
reached that level of alignment, which is why we're starting
to see such a surgeon deal activity. And examples like
(28:14):
some of the ones that I mentioned, the Shanker deal,
the Coyote deal, illustrate the fact that a lot of
large buyers and sellers have finally come to some consensus
around what's.
Speaker 1 (28:24):
Fair right and inflated multiples probably led to inflated egos
of some of the selling companies. So you know, in trucking,
a seller is usually motivated because it's a family business
and no one wanted in the family wants to continue.
What motivates most of the sellers that you are involved with, well, I.
Speaker 3 (28:45):
Think there are a few scenarios. I think one scenario
is it's a founder who's built something great but wants
to do something different. It's the life transition, right, So
maybe it's an age and stage. You know, worked hard,
built the business, want to step back and retire, or
want to go start something different, or want to make
a different life choice. I mean, as an example, one
(29:09):
of the great CEOs that I worked with earlier in
my career was Lewis D. Joy. Lewis to Joy built
New Breed, grew it over the course of two decades
to over six hundred million dollar value company, and then
he sold to XPO in twenty fifteen. Because you want
to do something totally different. That totally different thing was
going into government and public policy and public service and
(29:30):
he's now the Postmaster General and so look, not everybody
gets to do that. But it's a good illustration to
the point, which is sometimes people get to a stage
where it's like, all right, I'm ready for something different.
The second reason is sometimes seller gets to the point
where here she says, you know what, my business is good,
(29:51):
but I'm in an industry where there's consolidation, and if
I'm whatever running one hundred million dollar truck brokerage business,
but I'm competing against multi billion dollar giants. I got
to be a part of something bigger. And so that
owner might say, I'm going to sell or merge with
another company in order to be a part of something bigger.
And that's certainly part of what happened with XPO. It's
(30:13):
part of what we're seeing and doing with Everest. It's
a good example where where CEOs or owners of companies,
it's not like they're cashing out because they're done and
they're retired. It's because they recognize that they will have
a stronger, better combined business if they sell or merge
into a consolidator. And I think that's important. And then look,
(30:35):
I think there are also, you know, third scenarios where
people realize I mean, as my friend Hurbsheer likes to say,
most people who own their business think it's an heirloom, right,
I'm going to pass it on for generations. But then
when they look at it more closely, they realize, no,
it's an asset. And so an heirloom is something you
keep forever, but an asset is something that you could sell, right.
(30:56):
I mean, if you've built a great business and you're
thinking what do I do for kids? You know, maybe
your kids don't want to be in the logistics world, right,
and maybe they're passionate something else, and maybe, you know,
sell the business and giving them money and freedom and
choice to do whatever they want is, you know, is
better for you and better for them. So I think
all those are factors that play into it. But ultimately,
(31:19):
and I guess lastly, there's one fourth thing that I'll mention,
which is market market conditions, including tax Right now, we're
in an ecosystem where the tax rates which were lowered
in twenty seventeen are set to expire at the end
of this year. Now we'll probably be extended in some
(31:40):
form because the Trump administration wants to, and there's a
Republican Senate, Republican Congress that supports that as well, But
you don't know. I think one thing that's clear is
this is an unpredictable climate. And so you know, if
somebody who's built a business and wants to sell and
do so under you know, favorable market conditions or tax regimes,
certainly that that's an important consideration as well. So I'd
(32:02):
say those are four profiles and factors.
Speaker 1 (32:05):
Yeah, and you mentioned you know that the M and
A market is poised to heat up this year.
Speaker 2 (32:12):
How about the IPO market.
Speaker 1 (32:13):
Are there any large private companies that you know that
are on your radar that might go public or talked
about going to public. Do you think that that market's
going to heat up as well in twenty twenty five?
Speaker 3 (32:23):
Yeah, yeah, I do. On the on the classic logistics side,
there are some major companies, some terrific companies that are
poised to go public. Keen An Advantage would be one example,
and they're certainly in a position where they're big enough
and yeah, high quality business that I would expect should
(32:47):
go public this year. Worldwide Express would be another another,
you know, act light consolidator in the logistics arena. And
then on the software side and tech enabled services side,
ship Bob is a candidate to do so in e commerce, fulfillment,
software and take enabled services. So look, I think there
are a number of companies in the supply chain world
(33:09):
that are poised to go public in the next couple
of quarters.
Speaker 2 (33:13):
Right, and does does BGSA do they?
Speaker 3 (33:16):
You guys?
Speaker 2 (33:17):
Do I pos as well?
Speaker 3 (33:18):
BGSA does full service investment banking, so you know, certainly
can help on yet that and all the above, Most
of what BGSA has done historically has been M and
A and you know, private capital markets activity for the
simple reason that if you think about the logistics industry,
you know, something like ninety nine percent of all logistics
(33:40):
companies are private. But yes, we've certainly done plenty of
work on the public side as well as the private side,
and I think there's there's plenty of opportunity there.
Speaker 1 (33:49):
You know, when I was reading through your bio, you
know you had in there that you know, you started
transportation working for a family business. Did you know, as
like you knows as a fourteen year old kid that
you were going to go into your family's business, And
maybe you can talk about, you know, exactly what kind
of business that was.
Speaker 3 (34:07):
You know. I remember watching an interview with a college
basketball coach from small school who made it into the NBA,
excuse me, the NCAA sweet sixteen, and somebody asked him,
in your wildest dreams, did you think this would happen?
And he said, sudden, my wildest dreams are not about basketball.
So my dreams as a fourteen year old boy were
(34:30):
not about logistics. Good, but I did have exposure to
the industry early on, and a turning point for me was,
you know, look, when I was in college, I worked
for a you know, summer job in Ami and the
you know, truck leasing business, and yeah, struve to be
the you know, first and last out work you know hard,
(34:51):
worked on opening a new market in Baltimore and a
couple of other things. And what struck me was it
was an interesting business, it was growing, and it was Look,
there are some businesses where there's an incredible amount of
things that have to go right in order for you
to succeed, like, for example, biotech. You know, if you're
(35:12):
in the biotech world, you could spend a decade of
your life working on a drug and spend over a
billion dollars, you know, trying to go through the FD
approval process, and then in the end it might fail.
You'd say, well, wow, I just wasted ten years of
my life for nothing because there's this high data. On
the other hand, if you get it right and you're
the next you know, maderta amazing. But what struck me
(35:35):
was in the logistics arena, if you work hard and
you're disciplined and your focus, you could be successful. And
there's sure I mean, there are lots of areas of
innovation in areas of risk, but I just saw a
pretty linear path to success there. And so when I
went into strategy consulting, I looked for opportunities to work
(35:57):
in the transportation arena. So I worked at Extra Trailer
Leasing was one of our clients, and you know, I
remember studying companies like C. Trobinson and Hub Group and saying, hey,
this is something that's taking off. It's really going to
be successful. And of course that was you know, in
the nineties, in the early days of the explosion of
outsourcing and asset light logistics, and so, you know, I
(36:20):
made the decision when I was in business school. I
was watching all these amazing startups in the internet arena.
There's a guy named Dave Perry who built something called Kendex.
It was the first B to B exchange, and in
his case, it was automating the chemical industry. And I thought,
wouldn't it be great if I could apply what he's
doing in the transportation world. And that's really what led
me to start Threeplex over twenty five years ago, and
(36:45):
here I am today. So that's how it really it started.
Speaker 1 (36:48):
For me and what is you know, you've kind of
built two very successful financial institutions.
Speaker 2 (36:55):
You know what's your favorite part of your job?
Speaker 3 (36:59):
I mean, for me, it's the opportunity to work with
great people in supportive innovation to build amazing things. Green
Streine is a really good example. I mean, when I
first met Felix, who is you know, really the founder
behind the business. You know, they had amazing technology, they
(37:20):
had some great ideas, but they were doing too much
and so you know, we had a conversation around focus
and well, what's the one thing that matters the most. Well,
the one thing that matters the most was using AI
to solve the problem of predictive pricing. And so the
whole thought process, the innovation, the creativity around saying, hey,
there are all these great things you could do and
(37:40):
all these great capabilities. Let's pick the best one. Then
let's figure out a path to turning that into something
much bigger. Who are the perfect customers and you know,
talking to companies like NFI and Werner and a host
of others, and who are the perfect people and talking
to outstanding people with experience and the transportation and tech arena,
(38:02):
you know, like Don Salvucci Fabia who became the CEO,
and it's done an amazing job, and what's the big
market opportunity and how to focus on that and then
partner with others in areas that are adjacent to that,
and then ultimately seeing all that strategic and creative work
turning into something that really blossoms. I mean that's really rewarding.
(38:24):
And it's rewarding because when you first of all work
with other people that have big dreams, and then you
can help those dreams come to life and then put
resources behind them and then have that translate into something
that really makes a difference for companies and customers for
the industry. I mean, I think that's fantastic, and it's intense,
(38:46):
and there's of course a massive amount of work, but
I mean in the end, having a dream and then
doing the work to put it into reality in partnership
with other great people is really rewarding.
Speaker 1 (38:58):
And I always like to ask the guests on the
Talking Transport podcast, you know about books that they've read,
whether it's on leadership, investing or transportation that's kind of
close to your heart.
Speaker 3 (39:10):
Absolutely So in my office, I organize the library by
theme and so seven feet to my left. I have
the shelf of biographies. And if I look at the
great biographies that I read and draw inspiration from, I
mean there's Type by Ron Churno, which is the story
of how Rockefeller built his empire. Of course, all the
(39:30):
Walter Isaacson books, including Elon Musk, Steve Jobs, and a
host of others. There's the Ben Franklin biography as well
that Isaacson wrote, Coolidge, et cetera. But a couple of things,
and then of course the the Winston Churchill biography by
Paul Johnson. What I love about biographies is if you
(39:54):
can get the accumulated wisdom of other people who have
accomplished great things over seven eighty ninety years of life,
and you know you read the book in a day
and capture all that wisdom. How amazing is that? And so,
But just to give you an example, I mean the
Paul Johnson biography of Winston Churchill. People know Churchill as
(40:16):
the great statesman who rallied Britain during World War Two,
but the truth is Churchill had some real low points.
For example, he was responsible for leading his men into
a calamitous battle in World War One that that of
course led to many of his trips being killed. It
could have been the end of his career. But what
(40:40):
did he do. He basically, he retreated, he reflected, he
wrote books, he thought, you know, and he came back bigger,
better and stronger. And look, we've all had our setbacks.
I certainly have. But you know, the idea that the
greatest leaders of the last century went through a hero's
journey of failure before getting to success. For me, he's
(41:03):
remotivating because during the times when things aren't going the
right way, and that happens all the time, it's great
to draw on that for strength. And so while this
might not be the transportation book that you're expecting, I
think learning from people like the Church biography for me
has been pretty powerful.
Speaker 2 (41:22):
No, that's great, that's great. You know I've read that
one too.
Speaker 1 (41:27):
That's it's very interesting journey that his life slash political
career took.
Speaker 2 (41:34):
Well, Ben, I really want to thank you for your time.
This is a great conversation, Lee.
Speaker 3 (41:38):
Thank You're great talking with you. Really enjoyed it and
appreciate all the great work that you're doing at Bloomberg Intelligence.
Thanks so much.
Speaker 1 (41:45):
And I don't want to thank you for tuning in.
If you liked the episode, please subscribe and leave a review.
We've lined up a number of great guests for the podcast,
so please check back to hear conversations with C suite executives, shippers, regulators,
and decision makers within the freight market. Also, if you
have an idea for a future episode, please hit me
up on the terminal or on Twitter at logistics Lee.
(42:06):
Thanks so much everyone, and have a great day.
Host
Lee Klaskow
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