How MacroPoint’s Bennett Adelson got two bites at the apple
Tech company CEO crafted plan for a bigger sale
What: Sold to Descartes Systems Group for $107 million
Why it matters: PE investment paves way for second payday — and maybe a third
In early 2016, Bennett Adelson’s freight-tracking business was at a crossroads.
Having spent five years building a technology platform that tracked a million truck drivers across the country, the MacroPoint founder and CEO had received more than 200 calls from prospective buyers.
“We had a lot of penetration in the logistics technology space and got attention from not only private equity, but the tech industry as a whole, including some of our customers,” Adelson recalls.
It was decision time: Sell to a strategic buyer and reap the reward of what he had created – as much as $60 million – or take on a private equity investment to lay the groundwork for more growth and an even bigger payday.
Adelson stepped on the gas, bringing in Susquehanna Growth Equity of Bala Cynwyd, Pa.
“The first deal was a $44 million deal,” Adelson says. “We felt we would be better served to continue to grow the business and create more value for our shareholders. Ultimately, that worked out for us because the business was worth $107 million one year later.”
Here’s an inside look at how Adelson crafted a strategy that earned him a second bite at the apple – and even a chance at a third – and his advice for other CEOs.
Don’t skip this step
Adelson knew he had built something special at MacroPoint, a market leader for truckload shipment visibility in North America. The company uses its technology to produce data that helps transportation brokers, logistics service providers and shippers track the location of their deliveries.
Between 2013 and 2016, revenue grew by nearly 800 percent to more than $12 million. With the right strategy, Adelson was convinced he could put his company in position to bring this high-tech, user-friendly service to every continent and become a global player in the logistics technology space.
“Strategic buyers were interested in MacroPoint, as well as private equity firms,” Adelson says. “They said, ‘We know you’re doing fantastic and you have tremendous technology that is changing the industry. We’re interested in acquiring your business because of that technology.’”
Adelson knew what he had, which is one of the most important components of a good business deal.
“Be aware of the stage your business is at,” Adelson advises. “When a potential acquisition is possible in the next couple years, keep your house in order and have the data available to have a conversation at any time in a very clean way.”
If you try to skip this step and make assumptions about your company’s readiness to be acquired without first confirming your facts, you do so at your own peril.
“You may have a great business and a number of potential buyers who are interested in it,” Adelson says. “But it’s like when somebody comes to look at your house and it’s a mess. You can’t sell it. You need company information, financials, key performance indicators and other critical data points to be ready. Have those due diligence items lined up so you can move forward.”
See it through their eyes
Adelson had plenty of options at his disposal as technology continued to capture the interest of potential buyers and investors. He needed to sort through the noise and identify the opportunities that were right for him and his business. He was quite clear about what he had at MacroPoint. Now he needed to see if that matched up with what potential buyers were seeking.
“Who are the potential buyers and the potential financiers? What are they looking for?” Adelson says. “It’s just like selling to a customer. Understand the need and what that customer is looking for. Tweak your business to fit those things and create value for yourself and your shareholders.
“If you can look at your business through the eyes of potential acquirers or financial partners, you can get it in position to create a tremendous amount of value.”
Adelson’s plan from the beginning had been to bring MacroPoint to a certain size and market penetration that would capture the attention of larger companies. His was a business that connects more than 8,000 transportation providers, brokers and shippers. As he studied the landscape, it wasn’t that he felt unprepared to go for top dollar. Rather, he was confident that a two-step plan — partner with a private equity firm, then find the right strategic buyer — would lead to an even greater financial return. Susquehanna was the right partner for the first phase of this plan.
“You can’t be afraid to take on financial partners where it makes sense,” Adelson says. “We chose Susquehanna because they were very entrepreneurially focused.”
Patience and flexibility
Susquehanna would be investing its own money — $44 million — and offered Adelson flexibility in terms of how the partnership would work.
“The term they use is patient capital,” Adelson says. “They could sell or hold the company for as long or as short as the CEO — in this case, myself — wanted. So if I wanted them to hold the company for 10 years, they would do that. And if I wanted them to sell it after one year, they would probably do that. That’s what they were willing to do.”
Susquehanna was simply looking to make a deal in which it could collect a sizable return on its investment. Its companies have a combined 40 percent annual revenue growth and more than $150 million in combined EBITDA. The firm was confident MacroPoint would be a positive addition to those statistics. As for Adelson, he felt strongly that Susquehanna’s $44 million investment in August 2016 would put him in position to get that second bite at the apple.
“The right amount of money in an acquisition is often more art than science,” Adelson says. “You don’t want to take more than you need. At the same time, don’t shortchange yourself by thinking that by not taking money, you are going to keep more of the value. There is a difference between keeping a larger percentage of the business and a larger percentage of the value that the business has.”
Do what’s right
Adelson continued to run MacroPoint following the Susquehanna deal. The accolades also continued. In April 2017, the company received a patent for its freight-tracking technology and subsequently announced that the platform on which this technology is being used had reached one million drivers. The calls from prospective buyers continued to come in and Adelson and his team looked for the inquiries that made the most sense.
Descartes Systems Group had known about MacroPoint for a couple years and was very interested in the business.
“We appreciate the unique value of a network-based business focused on the transportation industry with a track record of high revenue growth, high recurring revenue and profitability,” Descartes CEO Edward J. Ryan says.
“Ultimately, they saw we were continuing to grow the company very rapidly,” Adelson says. “They came back to the table and said they were interested in having a conversation.”
Susquehanna was also interested in making a deal.
“Descartes gave Susquehanna an opportunity to get a very high return on their investment,” Adelson says. “They were pushing the deal from that perspective. As a CEO, you have a duty to the shareholders to make the absolute best deal you can for the company. In this case, our private equity firm was a very big shareholder, so we had to do what was right for our private equity partner. Descartes wanted a very fast-growing company with good margins and they were able to get that. That’s how the deal came together.”
Adelson had a vision for what MacroPoint could be and the investment by Susquehanna and the acquisition by Descartes has fulfilled his ambitious plan. The combined company has about 1,700 employees and MacroPoint’s software will now be used around the world.
“This is going to give our employees tremendous opportunity to get experience growing our international business,” Adelson says. “It’s going to help our customers facilitate transactions around the globe. And because we’re now shareholders of Descartes – we are getting a third bite at the apple, including employees who have bonuses tied to Descartes’s performance.”
In the end, the decision to partner with Susquehanna before Descartes proved to be quite lucrative. Descartes acquired MacroPoint for $87 million in cash and $20 million in shares.
“We believe there are tremendous opportunities for the combined business, which is why we’ve become Descartes shareholders as a result of this transaction,” says Amir Goldman, a co-founder of Susquehanna.
Adelson says companies that choose to partner with a private equity firm need to know what they want going in to the relationship.
“If you’re a strongly operating management team, don’t bring in a private equity firm that is going to try to change that,” he says. “That’s not going to help your business. Go find a private equity firm that supports the current CEO. That’s what we had and it ultimately worked out for us.”
How to reach: MacroPoint, www.macropoint.com