Unconfirmed rumours are suggesting that syncreon, the asset-light, global contract logistics and supply chain management company, may be up for sale. The press agency, Bloomberg, reported that “people familiar with the process” have commented that the owners of the company have already appointed an investment bank to find potential buyers for the firm. The same source implied that the company “may be valued at as much as $1bn”.
Whilst there is no means, at this time, of checking the accuracy of this report it cannot come as any real surprise. syncreon is the product of a merger between the Canadian based automotive logistics provider TDS and Walsh Western, an Irish road freight company that had grown rapidly on the back of the IT production boom in the Irish Republic. The merger provided a platform for an impressive expansion across Europe, particularly into central Europe where a number of its key IT clients had developed production facilities.
The company is jointly owned by the Enright family, the founders of Walsh Western and an American private equity company called GenNx360 Capital Partners. The latter have gradually levered themselves into syncreon through the injection of capital starting in 2009. Consequently GenNx360 Capital Partners are likely to wish to realise a return on their investment.
As so often with private equity owned companies the level of transparency around syncreon is not high. However, it is reasonable to assume that the company has experienced considerable volatility in its core markets. Its North American business is heavily exposed to big US automotive manufacturers such as GM whose production volumes have moved from bust to boom since 2008. Similarly its IT customers, such as Dell, continue to experience fluctuation in sales.An interesting question would be, who would find syncreon an appealing acquisition? There are no shortage of big logistics service providers on the market yet the appetite of investors seems limited. There appear to have been no takers for CEVA although its private equity owners surely must have been open to offers, although Caterpillar were successful in selling CAT Logistics Services for a very generous price last year. The largest logistics service providers would appear to have no need to augment their already considerable capabilities in these markets, whilst many of the smaller global providers are under pressure from slow growing markets. Growth through such a large acquisition might be risky at present. Therefore a sale to another private equity company could be a strong possibility.