FreightWaves has learned that next-generation transportation management system (TMS) provider 3Gtms has been acquired by Sumeru Equity Partners for a whisper number of $87 million. 3Gtms, founded in 2013, took on investment from Trimble (NASDAQ: TRMB) the following year. Trimble remains a major investor in the company. PJ Solomon advised 3Gtms on the sale.
The deal has not been officially announced and financial terms were not disclosed.
Sumeru Equity Partners is a Foster City, California-based private equity firm specializing in middle market tech companies. Sumeru was founded in 2014 by partners who previously managed the Silver Lake Sumeru Fund at Silver Lake, a large tech-focused private equity firm with more than $43 billion in assets under management.
According to Pitchbook data, Sumeru has $1.5 billion in assets under management and $240 million in cash reserves for acquisitions. Last week Kyriba, one of Sumeru’s portfolio companies, sold to Bridgepoint for $160 million at a $1.2 billion post-money valuation.
3Gtms chief executive officer Mitch Weseley spoke to FreightWaves by telephone, confirmed the acquisition, and discussed his product and the deal. Weseley and his team of co-founders are veterans of the TMS industry; most of them worked with Weseley at G-Log, which was acquired by Oracle in 2005.
“We looked at an industry that was poorly served by the products that were there,” Weseley said. “The top products were long in the tooth, had been designed 15 years earlier, and the transportation world had changed dramatically. The only way to create a [TMS] product that would give customers what they wanted was to do it from scratch.”
Weseley cited several fundamental changes introduced by 3Gtms that differentiated the product from legacy TMS products, including having multiple third-party logistics providers (3PLs) on the same instance of the software, and weaving optimization algorithms directly into the TMS.
“One of the big challenges in the industry that no one figured out until 3G,” Weseley explained, “was meshing the conceptual idea of optimization – that by nature is a batch process – into the real world where data are changing constantly in real time. There are an unlimited number of things that can and do happen during the process [of a load], and as things change, you need the tools to deal with the changes and show what they really mean and how to address them.”
Weseley said that 3Gtms was different from other new TMS products because it is not a “light TMS.” He characterized 3Gtms as the most powerful software in the industry – built to handle anything a large, highly complex shipper or logistics service provider could throw at it, including brokerage, freight forwarding, managed transportation, reverse logistics and residential delivery.
“The big change in the industry is the blurring if not dissolving, of the lines between the different business units and the number of companies in our business who want to have all of their non-asset businesses on the same technology platform,” Weseley said.
3Gtms is relentlessly focused on customer success, has the best retention rate in the industry, and would rather walk away from a sale than over-promise and under-deliver, Weseley said. The company spends a great deal of time learning about prospective customers’ businesses, asking questions about their operations, and working through the transportation industry’s poorly defined nomenclature before demonstrating the TMS.
“I do business one way – building the best product and having the happiest customers,” Weseley said. “Losing a customer is unacceptable here.”
The decision to take 3Gtms to the market was based on favorable market conditions and private equity’s appetite for the space, and the desire for more capital to fuel growth.
“We built a great company and there were lots of firms wanting to buy or invest in us,” Weseley said. “We felt that the market was at a nice level, it was a good time to take advantage of it, and we wanted some cash to put on the balance sheet and accelerate growth.”
Many of the private equity firms that 3Gtms met with had fixed ideas about how software companies should operate and grow, Weseley said, but Sumeru had no set playbook.
“The most important thing was that they’re backing us and the team,” Weseley said. “Some of the finalists were saying things like ‘we want to come in and hire eight salesmen off the bat, that’s how you grow,’ but Sumeru said ‘we don’t have a playbook.’ Sumeru was very curious, wanted to learn more and figure out the right way to do it.”