Greenbriar Equity investment gives 3PL resources for expansion.
Private investment firm Greenbrier Equity has taken a majority stake in privately held SEKO Logistics as part of a recapitalization undertaking aimed at helping the company grow quickly, primarily through acquisitions, the companies announced May 5.
With the logistics provider heavily focused on the digital economy, it is likely that its electronic commerce service will receive a dose of any new resources.
Chicago-based SEKO has a 40-year history in freight forwarding, but in recent years has expanded into a full-service logistics provider with transportation, warehousing, supply chain, home delivery and e-commerce capabilities. The company has 120 offices in 40 countries, including 58 in the United States.
SEKO Chief Executive Officer William Wascher and the senior management team will continue to run SEKO, according to a joint statement by the new partners.
Terms of the deal were not disclosed, but in a phone interview Wascher said the transaction puts SEKO’s fragmented global ownership under a single corporate umbrella. SEKO has an independent contractor model and different ownership groups for the United States, United Kingdom and Hong Kong-China entities, although all the offices around the world worked exclusively under the SEKO brand using a common technology platform. Now the company will own all of the operations rather than having an independent contractor relationship, with more than 50 shareholders transferring their interests into the consolidated company.
Greenbriar’s investment will also provide capital to support an aggressive growth strategy.
“Historically, we’ve grown organically and we feel the time is right in the logistics lifecycle that we should start entertaining strategic acquisitions” to strengthen key vertical markets such as retail and energy, and go after new opportunities in other industry verticals, Wascher said.
SEKO had roughly $650 million in revenue last year, with retail accounting for 47 percent of the total.
Greenbriar of Rye, N.Y., focuses investments in the transportation sector, with more than $2 billion of raised capital deployed through three funds. It typically targets companies with enterprise values between $100 million to more than $1 billion, investing between $75 million to $150 million of equity in each transaction. Its portfolio includes non-asset-based 3PL Transplace and Lazer Spot, a provider of outsourced yard management services for truck fleets. It recently cashed in its investment in GENCO Distribution Services, a large 3PL that was acquired in January by FedEx Corp. for $1.4 billion.
Wascher said Greenbriar’s expertise analyzing and negotiating acquisitions will be a major asset for SEKO.
The expansion strategy will focus on overseas markets. The company has a broader service offering in the United States and customers have been asking SEKO to spread those core competencies around the globe, he said.
The logistics provider, for example, has a strong capability in the medical device field. It recently opened a facility in Ireland to manage manufacturers’ inventory of diagnostic-imaging equipment such as ultrasound and MRI machines to be used in trial programs at hospitals and clinics throughout Europe. SEKO’s white-glove teams deliver, set up and help operate the equipment on site, and then decontaminate it in clean rooms upon return.
If SEKO makes a domestic acquisition it likely will be for a trucking company, Wascher said. SEKO used to have its own fleet, but didn’t have the volumes during the recession to justify the cost. Now the company has grown to the point where it makes sense to run dedicated equipment between certain city pairs, he told American Shipper.
SEKO is already growing its U.S. footprint. In April it moved into a new, 100,000-square-foot facility in Los Angeles that consolidates a smaller freight forwarding office with a traditional cross-dock and an import distribution center in one location. The warehouse is certified by the Transportation Security Administration to screen all cargo going on passenger planes, which SEKO officials say is a better option than missing a flight because an airline was too busy to check it in time. The 3PL now has four facilities in the Los Angeles area, including inland distribution centers in Chino and Riverside, and a dedicated medical/technology facility in Costa Mesa that provides a range of services from trade show support to packaging design and market development for high-value computer, satellite, telecom and hospital equipment.
Meanwhile, SEKO continues to expand internationally, especially in Africa, after primarily spending its first 30 years as a domestic freight forwarder. The company recently opened its third office in South Africa, this time in Capetown. Last year, it opened an office in Algeria. One of its biggest sources of business is delivering fresh fish from East Africa to Europe. And SEKO opened a station in Libya three months before the revolution and continues to operate there with locals who know the language and culture, and have experience transporting goods in North Africa. Brian Bourke, vice president of marketing, said the office is able to function because it did not have ties to the Ghadaffi regime.
Customers doing business in Africa today are demanding the same level of booking and shipment tracking capability as elsewhere, Bourke said. SEKO’s technology has been an advantage because it entered the region with a modern, uniform system compared to some other global third party logistics providers that acquired local companies and had to stitch together legacy computer systems across their enterprise. A major feature of SEKO’s online capability is that its customer tools are available in Arabic or French, rather than just English.
International Omni-Channel. SEKO officials say international e-commerce is the company’s fastest growing service area and it’s transforming how it does business.
In the past 21 months SEKO has ramped up to handle a spike in demand for outbound consolidations to Asia from U.S. retailers that are focusing on overseas markets for the first time, Bourke said.
SEKO every day is shipping from Los Angeles, Atlanta and other airports unit-load devices stuffed with Internet orders to places like Sydney and Melbourne, Australia; Kuala Lumpur, Malaysia; Singapore; New Zealand; Hong Kong and the Philippines.
It’s business that didn’t even exist less than two years ago.
The change is a function of retailers’ new international priorities and a rising middle class in Southeast Asia that covets American goods, or goods that are available in America at a better price or because there is more inventory to select from, according to Bourke.
In Australia, SEKO bundles individual orders to multiple consignees in bins and fills out a master airway bill with the goal of keeping each bill under the $1,000 de minimus threshold. The bins are loaded into the air freight containers. Australia has one of the more progressive de minimus regimes in the world at AUS $1,000 ($790), meaning that goods below that value pay no duties and taxes upon entry, although they must be declared.
The third party logistics provider also pre-labels each parcel with the local postal destination to speed up delivery because online shoppers expect to receive their goods quickly.
“We’re doing more air freight consolidations to Asia than we are doing from Asia. It’s incredible. It’s changed the dynamic of our organization,” Bourke said.
SEKO is also managing e-commerce shipments in other parts of the world, such as Europe to the United States, “but the most compelling and dramatic change for us is the exports to Asia-Pacific,” he added.
Many retailers who in the past focused on the U.S. market, and maybe Canada, have now created online shopping experiences and checkout processes that are more friendly to online customers in other nations—a realization that more than 80 percent of the world’s purchasing power lies outside the United States.
To capitalize on that trend, SEKO in 2013 invested in a digital content management company based in the United Kingdom called Red Hot Penny and created a new integrated omni-channel logistics division that offers a single platform for web-storefront development and design, global fulfillment, delivery management and returns. It followed that up by investing in digital marketing company Metakinetic.
Red Hot Penny creates the online shopping experience, links products to a retailer’s enterprise-resource-planning system that generates orders and feeds transportation management and inventory management systems, and calculates the duties the buyer has to pay.
The idea is to make it easy for e-tailers and retailers to outsource their international fulfillment and logistics, aided by a network of multi-user distribution centers in the United States, Asia, Europe and Australia. Retailers can track inventory and product availability in real-time, as well as schedule deliveries and select shipment methods.
Within the destination country, SEKO has arrangements with parcel and mail providers to deliver the shipment to the end customer.
Last summer, SEKO opened a 152,000-square-foot distribution center north of London to support the U.K. retail industry’s online sales growth. Online sales generated by U.K. retailers in international markets are forecast to grow sevenfold to 28 billion pounds ($43 billion) by 2020. International sales represent 14 percent of total online sales in the United Kingdom and are expected to account for more than 40 percent of e-commerce within six years, according to SEKO.
The new location in Milton Keynes follows the 2013 opening of a similar size DC in Northampton and a dedicated omni-channel facility in Cranbury, N.J., for British retail brands starting out in the U.S. market.
SEKO is also working in the business-to-business e-commerce arena. One of its clients is a company that makes promotional items—shirts, coffee mugs, and suitcase tags—and needs them shipped all over the world to event sites. SEKO fulfills the orders from a handful of regional distribution centers.
SEKO has also developed another relatively unique service, in partnership with Netherlands-based Secans Global, to help retailers expand overseas. The company’s Store Development Service is a turnkey product that enables merchandisers to open overseas brick-and-mortar stores faster with greater control and lower costs. Project experts with knowledge of local rules and regulations quickly secure permits, set up a transportation management plan to ensure timely delivery of materials and supplies for construction, and create a logistics process to make sure stores are stocked with the correct inventory going forward. SEKO says the concept can cut several weeks from the normal process so stores can start making money sooner.
Bourke said project cargo is also becoming a bigger piece of business for SEKO, especially with oil and gas developments in Africa, where the company has a strong footprint.
This article was published in the June 2015 issue of American Shipper.
