While we were away on a two-week summer break, there was a significant acquisition announcement related to cloud-based supply chain technology, one that warrants a Supply Chain Matters perspective.
Last Tuesday, ERP provider Infor announced that he had entered into an agreement to acquire supply chain logistics and commerce network provider GT Nexus for $675 million. GT Nexus technology supports the ability of buyers to transmit order information across a connected supply chain business network, linking various suppliers, logistics providers and financial institutions.
According to the announcement, this deal is expected to close within 45 days, pending regulatory approval. GT Nexus is expected to operate as an independent division of Infor.
This author was not at all surprised at this announcement concerning GT Nexus. It was just a matter of time, and which ERP or enterprise software provider would pull the trigger.
In early January, The Wall Street Journal had reported that two supply chain business support providers, one being E2open, the other GT Nexus, were being pitched as potential acquisitions. Readers might recall that E2open, a publically traded firm at the time, was subsequently acquired by private equity firm Insight Venture Partners and has since been taken private. That transaction was valued at $273 million, approximately three times current revenues. The GT Nexus transaction value of $675 million however, is a surprise, in terms of overall amount paid.
The core of GT Nexus has always been its end-to-end supply chain execution connectivity with ten of the largest third-party logistics (3PL) services providers along with the largest ocean transportation providers as part of its supply chain execution network. Its customer base that includes names such as Adidas Group, Caterpillar, Columbia Sportswear, Pfizer and Procter and Gamble were motivated by needs for deeper supply chain wide execution synchronization.
In January of 2013, GT Nexus merged with cloud-based sourcing provider TradeCard in a strategy focused on adding financial services connectivity to supply chain networks. That included pre and post export financing and payment protection services. At the time of the merger, TradeCard had deep relationships among retail, apparel and consumer soft goods industry players who require such needs in financial supply chain services.
In the view of Supply Chain Matters, that merger moved GT Nexus further towards financial services business support opportunities as opposed to opportunities for broader supply chain planning and execution control synchronization. TradeCard CEO Sean Feeney assumed leadership of the combined companies after the merger.
For many years, GT Nexus had an on again, off again partnership with supply chain planning provider Kinaxis, in an attempt to add deeper planning and control capabilities. That relationship brought little in joint customer deployments and was broken off several weeks ago.
According to the announcement, Infor plans to leverage GT Nexus for its cloud-based capabilities in integrating direct procurement processes. Infor additionally has an existing ERP customer base anchored in fashion and retail customers which focuses this acquisition as an industry concentration strategy facilitating the integration of merchandising, marketing and online Omni-channel fulfillment needs across an extended supply chain business network. The ERP provider further hints of the ability to utilize the GT Nexus cloud-based network in the support a two-tier ERP strategy that utilizes the combination of Infor and GT Nexus capabilities in support of extended supply chain business process, S&OP and other decision-support needs. Once more, Infor is no stranger in M&A activity, and has demonstrated a track record of aggressive technology platform and application integration of its prior acquisitions.
Supply Chain Matters has long advocated the importance for industry supply chains to leverage an end-to-end business network to synchronize supply chain planning, execution and customer fulfillment needs on a global basis. The fact that two of the more visible, independent cloud-based extended supply chain network providers have now been involved in acquisition activity involving nearly $950 million is testimony to the attraction and importance of this cloud-based technology area.
For existing customers of either GT Nexus or E2open, the open question remains how each of these providers will evolve under new leadership and differing perspectives.
For our part, Supply Chain Matters will continue to provide insights and recommendations regarding this important technology area, and how both of these network providers evolve under new management.