Follow the Money: Investments Rise in Supply Chain Operating Networks

By Adrian Gonzalez

This past Tuesday Elemica announced that it was being acquired by private equity firm Thoma Bravo. Here are some quotes from the press release:

“Elemica represents the ideal archetype for what we look for in an investment at Thoma Bravo,” said A.J. Rohde, Partner at Thoma Bravo. “The company has developed a patented supply chain and logistics network in key verticals such as chemicals, tire & rubber and other process industries, provides mission-critical applications for its customers, and is run by a world class management team led by John Blyzinskyj, with whom we are thrilled to be partnered.”

“The goal remains to grow Elemica’s business network into a multi-trillion-dollar commerce engine annually,” said John Blyzinskyj, CEO of Elemica. “This acquisition will accelerate the time to market for solutions that automate and orchestrate mission critical supply chain processes across a global community of buyers, suppliers and logistics providers. Thoma Bravo’s exceptional track record and proven expertise in our industry will enable Elemica to further capitalize on its growth and leadership.”

Elemica (a Talking Logistics sponsor) was founded in 2000 by leading companies in the process industry, including BASF, BP, The Dow Chemical Company, and DuPont. Having your owners be your largest customers has its advantages, but in light of the rapid changes occurring in the technology realm and competitive landscape, especially with Supply Chain Operating Networks, it’s clear from the statements made that the time had come for the company to find an investment partner who was in a better position to accelerate growth and innovation.

This acquisition is the latest example of investments rising in Supply Chain Operating Networks. Last month, for example, Kewill (owned by private equity firm Francisco Partners) announced the acquisition of LeanLogistics, a leading network-based transportation management system (TMS) provider, which followed the company’s October 2014 acquisition of IBM’s Sterling TMS solution, which is also network-based. (See here for my comments about the Kewill-LeanLogistics deal).

Other notable deals and transactions in recent months and years include:

Infor’s acquisition of GT Nexus (August 2015). See here for my comments about this deal.
E2open acquired by Insight Venture Partners (January 2015).
Flextronics spins-off Elementum, raises $44 million in funding (February 2014).
Thoma Bravo acquires Global Healthcare Exchange (February 2014). Yes, this is the same Thoma Bravo that just acquired Elemica. It will be interesting to see if any cross-pollination of network technology and participants will occur.
SAP’s acquisition of Ariba (May 2012)

And a couple of weeks ago, the Wall Street Journal reported that Descartes, which has thousands of trading partners connected to its Global Logistics Network, is raising funds for more acquisitions.

Why is money flowing to Supply Chain Operating Networks? For all the reasons I’ve written about for years (see links below), including the recognition by everyone in the market that for business processes involving many external trading partners, network-based solutions are the best platform. As Joe Dixon, SVP of Supply Chain at Brooks Brothers, commented at the GT Nexus Bridges 2015 conference: “SAP is our internal ERP system, GT Nexus is our external [supply chain] ERP system.”

There is another emerging factor/trend that is fueling these investments, something I plan to explore in more detail in a future post: the convergence of commerce, logistics, and technology.

This trend is most pronounced today in the business-to-consumer (B2C) realm, with Amazon and its growing investments in logistics a prime example (pun intended). But similar and even larger opportunities exist in the business-to-business (B2B) realm and Supply Chain Operating Networks, perhaps coupled with blockchain technology, will no doubt play a critical role.

If you ask me, the smart money today is on Supply Chain Operating Networks.

For related commentary, please read: