Rather than slow down its global shopping spree for suitable takeover candidates, WiseTech Global notched up its momentum in October with three acquisitions inside a month. The logistics technology provider has scooped up over two dozen companies between January 2017 and this November.
The latest takeover, which was announced at the end of October, brought CargoIT i Skandinavien into the fold, a provider of customs management as well as forwarding, warehousing and transportation solutions based in Stockholm. The Swedish company’s client base includes DHL, SAS Cargo, Mitsubishi Motors and Hyundai.
Two weeks earlier, WiseTech had struck on its home turf in Australia with the acquisition of SmartFreight, which provides parcel and LTL shipping software to clients in Australasia, the British Isles and South Africa. It processes over 50 million parcels a year in Australia alone.
The SmartFreight takeover came on the day following the announcement that WiseTech had signed an agreement with LSI Sigma Software to take over the UK-based firm, which sells integrated logistics solutions (from customs software to forwarding and warehousing functionality) under its DataFreight moniker to the likes of Maersk Line, COSCO Shipping, Dachser and Allport Cargo Services.
The profiles of the three October acquisitions illustrate WiseTech’s strategy of building up a comprehensive footprint in logistics software covering all modes of transportation as well as forwarding, warehousing and customs brokerage. The company strengthened its presence in another sector in August when it bought US intermodal trucking software provider Trinium, whose offerings cover the management of sea freight boxes moving between port terminals, to and from inland rail terminals, container yards and warehouses.
The relentless shopping spree also reflects global ambitions. Between May and August WiseTech took over Spanish customs solutions provider Taric, US Postal Shipping software firm Pierbridge, Canadian customs solutions provider Fenix and Turkish logistics and customs software firm Ulukan. Commenting on the acquisition of Taric in Spain, WiseTech founder and CEO Richard White called it a springboard for expansion in Spain and Europe as well as into Spanish-speaking Latin America.
WiseTech management has described its global takeover activity as a strategy to accelerate long-term organic growth through targeted acquisitions.
“We buy into leading market positions that would take years to build, integrate swiftly, and drive value across the platform We are acquiring leading software vendors across G20+20 – targeting 90% of (the) world’s manufactured trade flows,” the company stated in late October when it raised its guidance for the year.
So far, the strategy appears to be working. Fiscal 2018 saw a 28% increase in net revenues, while EBITDA were up 45%. Buoyed by these results and the ongoing expansion, management upped its earnings guidance for fiscal 2019 in October. It now expects revenues to climb between 44% and 50% to reach US$320 million to US$333 million, while EBITDA are projected to reach US$102 million to US$107 million.
“We are accelerating into more products, more geographies and more adjacencies ... driving our long-term growth with each innovation and acquisition,” management declared.
The blistering pace of expansion inevitably raised questions about potential integration problems, evoking the scenario of a disjointed organization too preoccupied with its expansion and losing its grip on its core product.
For his part, White has pointed out that none of the companies that WiseTech has acquired has been too large to digest. He declared that he does not believe in the merit of big acquisitions and that management is not getting distracted by “shiny object syndrome.”
“We’re buying companies in markets where we strategically expand into,” he stated.
Several financial analysts have expressed confidence that the company can maintain its current course, pointing out that margins in this sector have been healthy and that WiseTech’s customer attrition rate has been below 1% for the past five years.
During this time the company has built up a strong market presence. Its customer base includes 34 of the top 50 global third-party logistics firms and 24 out of the top 25 forwarders worldwide.
The ongoing trend to digitization in the logistics industry should provide a potent tailwind for WiseTech. The International Air Transport Association recently announced that the electronic air waybill will become the default contract of carriage for all air cargo shipments on enabled trade lanes come January 1, 2019.
By Ian Putzger
Correspondent | Toronto
