What are the actual costs of tech integration when two companies come together ? More than you ’ d think . And these costs , which are often hidden , can put a real financial strain on the new entity . CLDA Magazine interviewed Tim Kravitz , CEO / CTO of Logistics Technology HQ , for his take on the economic and human costs of bringing two companies together .
CLDA Mag : Your company , Logistic Technology HQ , has been involved in some of the most high-profile mergers in the logistics space . Tell us a little about what your company brings to that process .
Kravitz : Our team of logistics technologists has over 300 + years of combined experience designing , implementing , coding , and maintaining complex transportation management systems , business processes , APIs , and analytics platforms for nationwide , regional , and local couriers . At Logistics Technology HQ , we take our wide range of industry expertise and put them all under one roof so that logistics companies have a place to get IT professional services at a reasonable price point . That means we can bring together all aspects of technology into a newly-merged or acquired company because we ’ ve seen it all before .
CLDA Mag : Much has been written about the explosion of M & A activity in the last-mile space . What has Logistics Tech HQ ( LTHQ ) seen among its clients over the past few years ?
Kravitz : LTHQ has been lucky enough to have a frontrow seat to most of the M & A activity over the past three years . We have seen a lot of activity due to the spotlight cast on logistics from the coronavirus pandemic . As a result , many private equity and venture capitalist firms have invested money in all logistics areas .
The most common investment strategy we ’ ve seen has been consolidating regional and local couriers around the United States and Canada under one enterprise brand . This strategy has been a familiar pattern over the past 25 years . However , it has recently accelerated due to the pandemic and interest in the final-mile vertical . This approach aims to create a robust and reliable network with common delivery services at a better price point . In addition , these firms look to reduce redundant back-office costs to boost margins across the enterprise . The resulting new enterprise can then use the cost savings to increase profitability at the macro level and invest in things that differentiate it from its competitors , like technology .
The interest in the final-mile has also crossed borders . We are now seeing larger international companies investing in the US final-mile space . For example , Geodis purchased Need It Now Delivers in November of 2022 because they wanted to “ accelerate their growth in the United States .”
The other significant investments we see are in technology startups like new TMS solutions , mobile apps , and freight tracking . Investors have seen a lot of success in the gig economy with solutions like Instacart , Grubhub , and other delivery platforms . Because of that , private equity firms are putting money in to see if they can find and profit from the next “ unicorn .”
CLDA Mag : From what you ’ ve seen , has the pace of consolidation in the industry slowed down or picked up in 2023 ?
Kravitz : We are seeing a slowdown in M & A activity in 2023 due to new economic pressures like inflation and high-interest rates . As a result , the approach of consolidating the final-mile is not as widespread as it was in 2022 . That ’ s because of the risk and cost associated with these types of ventures . summer 2023 I customized logistics & delivery Magazine 37