AIT Worldwide Logistics (AIT) is a leading non-asset-based global freight forwarder within the third-party logistics sector. Harris Williams recently advised AIT on its sale to The Jordan Company.
In this piece, professionals from the Harris Williams Transportation & Logistics Group share insights on what made AIT an exceptional investment opportunity, as well as their advice for buyers and investors interested in the global freight-forwarding and third-party logistics (3PL) space.
What makes the international freight-forwarding sector appealing to buyers and investors?
Mountcastle: There continues to be strong investor interest in the 3PL sector, especially in platforms with the scale and infrastructure to serve global customers’ complex supply chain needs. It’s diverse and resilient, is linked to many end markets, and is ripe for consolidation. The freight-forwarding subsector is composed of companies that arrange and monitor freight transportation through international and domestic supply chains. Several macro trends drive growth in the segment and call attention to the mission-critical role these companies play in the global logistics ecosystem.
Bass: One significant macro trend is the growing complexity of supply chains. Global sourcing in itself is complex, but now there is a need for much greater flexibility in routing and more focus on optimizing the best transportation mode. The pandemic revealed how complex the global supply chain can be: Shippers were pushed to make their supply chains more nimble in the face of route and lane closures and restricted capacity. What used to go air may now go ocean. What used to go ocean may now go air.
More recently, when the Suez Canal was blocked by a grounded container ship, shippers had to make arrangements for freight to travel around the tip of Africa, which adds up to six weeks transport time. Natural disasters, labor disruptions, or any number of idiosyncratic risks make moving freight around the world a dynamic and complex business.
Meredith: Such complexity motivates shippers to outsource to freight forwarders. It relieves shippers from the burden of managing all of these challenges and gives them access to the forwarders’ scale advantages—namely, better pricing and more capacity. The trend toward outsourcing aspects of supply chain management to 3PL providers is ongoing, but COVID-19 certainly crystallized the value that freight forwarders provide.
Mountcastle: Another macro trend impacting this sector is e-commerce growth, particularly in the current environment. E-commerce has reshaped supply chains, driving significant opportunities for 3PLs to deliver dynamic solutions. The speed with which goods must be delivered to meet customer expectations, and the growing need for last-mile delivery of goods of all sizes, places significant pressure on shippers to ship quickly, reliably, and efficiently.
What made AIT particularly appealing to its investors?
Bass: While there are companies in the segment that focus on a particular mode or a particular end market, AIT is intentionally quite diversified. The company can handle customers’ needs across air, ocean, and ground, including their need for home delivery of heavy goods. AIT also serves and has trusted partnerships in nearly every industry, including aerospace, automotive, consumer, food, government, healthcare and life sciences, high-tech, and industrial. That market diversity and range of services give it great resilience, which investors appreciated and valued.
Meredith: While many freight forwarders work through agents or affiliates to provide global service, AIT has its own employees in more than 85 locations in Asia, Europe, and North America. That level of global control and visibility from origin to final destination allows it to better serve a multinational customer base that ships products all over the world.
Mountcastle: AIT also differentiates itself by being more creative and more nimble than some of its larger competitors. The company is tremendously customer-centric. It has built its business model around its customers’ needs instead of forcing customers into a rigid network and service set as some competitors do. AIT’s vertical industry expertise and selling model allow it to be highly service- and solution-oriented and to become tightly embedded with customers. By combining its deep industry knowledge, its expertise in transport modes, and its feet on the ground in origin and destination locations, AIT designs and delivers innovative, real-time solutions for customers.
Meredith: In addition, AIT has used its proven M&A capability to grow its expertise in specific verticals. Within the past 18 months, AIT completed acquisitions to expand geographically, extend its presence in existing end markets, and strengthen its portfolio of service offerings—all of which accelerate and open new avenues for growth. This ability to identify, execute, and integrate acquisitions resonates really well with 3PL investors.
Bass: Another significant AIT attribute is its proven, invested management team, which has a clear vision. Ownership is a great motivation to create value in every customer transaction. The company’s vision and strategy are constantly evolving based on the needs of its customers and the development of its employees. Its strategy is the guiding factor in hiring decisions, evaluating add-on acquisitions, and deciding whether to enter new verticals or take on new clients. Every decision has to fit the strategy. That level of focus is not common among billion-dollar companies.
What advice do you have for prospective buyers interested in this space?
Mountcastle: Companies with a growth-minded culture are appealing, as this is a scale game. Freight forwarders who are moving greater collective volume can build strong partnerships with transportation providers that help them from both a rate and service perspective. Identifying opportunities with companies that have demonstrated strong historical growth and have a clear vision to continue to grow and scale is key.
Bass: 3PLs continue to acquire companies to expand service offerings, gain technological capabilities, increase network reach, and drive economies of scale. There are some very large multinational players. There are also many smaller companies that are focused on either specific transport modes, shipping lanes, or end markets. Companies like AIT are well-positioned to grow as the acquirer of choice for smaller freight forwarders as the sector consolidates. There are opportunities for attractive investments across the size spectrum in freight forwarding.
In addition to covering third-party logistics, the Harris Williams Transportation & Logistics Group has deep expertise in a wide range of transportation and logistics and automotive aftermarket subsectors. Learn more here: Transportation & Logistics.
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Published May 2021