Hundreds of startups rushing to automate the world's supply chains are drawing interest and, in many cases, big-ticket purchase prices from corporations aiming to capture their innovative technologies. So what's behind the supply chain M&A spree? The e-commerce boom and demand for increasingly sophisticated logistics operations are a large part of the phenomenon.
In recent months alone, retailers and other major players have paid billions of dollars for startups that can speed retail deliveries, make global shipping more efficient or otherwise streamline logistics.
Corporations are Snapping Up Logistics Startups
In August, Wal-Mart Stores Inc. agreed to acquire e-commerce business Jet.com for $3.3 billion, a move designed to ready the giant big-box retailer for faster e-commerce growth. Wal-Mart President and CEO Douglas McMillon called the deal "another jolt of entrepreneurial spirit being injected into Walmart," one that will accelerate the company's goal of a "seamless shopping experience."
That same month, ride-sharing pioneer and RocketSpace alum Uber acquired self-driving truck startup Otto — a RocketSpace Logistics Tech Accelerator - Cohort 1 participant — for what Bloomberg called an implied price of $680 million, announcing a partnership with Volvo at the same time.
Otto co-founder Anthony Levandowski will lead Uber's self-driving efforts across personal transportation, deliveries, and trucking, Uber CEO and co-founder Travis Kalanick said on the company's blog.
"More and more the world of atoms is interacting with bits," Kalanick wrote. "In order to provide digital services in the physical world, we must build sophisticated logistics, artificial intelligence, and robotics systems that serve and elevate humanity."
Around the same time, online freight marketplace Freightos, which also provides a cloud-based automated pricing and routing service for carriers, freight forwarders, and shippers, acquired Barcelona-based WebCargoNet. The deal will make selling and buying of carrier and freight forwarding services faster and easier, Freightos said.
And UPS in July announced it was buying third-party logistics company Coyote Logistics, "a technology-driven, non-asset based truckload freight brokerage company," for $1.8 billion. Coyote manages customers' shipments through available capacity on its large carrier network consisting of tens of thousands of trucking companies.
Those deals represent a slice of the hot global supply-chain startup M&A market. In the second quarter of this year, transportation and logistics companies worldwide announced more than 50 deals valued at $34 billion, or an average of almost $670 million each, according to PricewaterhouseCoopers (PwC). After trucking, logistics was the largest subsector, with $5.8 billion in deals.
What's Driving Supply Chain Acquisitions?
PwC cited several factors driving supply chain M&A, including positive global M&A activity across all sectors as the U.S. economy maintains a steady recovery and a corporate push to "outsource logistics as it becomes a more specialized and technology-driven function."
The firm also noted "the continued expansion of e-commerce and the demand it creates for investment in the logistics sector," and said that "globalization and the expansion of world trade will create the need for advances in technology and growth in the transportation and logistics sector."
As competitors accelerate the speed, efficiency, and modernization of their supply chains, corporations will need to keep their ear to the ground so they don't miss out on opportunities to partner with or acquire supply chain startups with the potential to disrupt their market.
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