"I'm more excited about the supply chain enabler side of it, that's actually building some of that tech to help brokers get more efficient, help shippers get more efficient, and help carriers get more efficient."
How Geoff Anderman Mastered Strategic Acquisitions with STG Logistics
On this episode of the Freight Caviar Podcast, we're speaking with Geoff Anderman, President & COO of STG Logistics, at the company's corporate headquarters. A former attorney turned logistics leader, Geoff shares how to masterfully navigate major acquisitions.
In the dynamic world of logistics, few stories are as intriguing and instructive as that of Geoff Anderman, the current President & COO of STG Logistics, a $2 billion company. Geoff's journey is a tale of strategic pivots and bold decisions. Beginning his career in the legal realm, he quickly realized a desire for more direct involvement in business operations.
Geoff recounts, "I started my career, believe it or not, as an attorney here in Chicago... I didn't like just being the guy who documented what everybody else was doing to make things happen. I wanted to be the guy doing some of that stuff."
This realization led him to a pivotal role at Wind Point Partners, a private equity firm with significant interests in transportation and logistics. His experience at Wind Point was an education in the nuances of business analysis and the art of deal-making, laying the groundwork for his future endeavors.
Geoff's career took a decisive turn when he joined Infinity Product Group as CFO, where he was instrumental in scaling the business before moving into the logistics sector with Dicom Transportation Group. His move to St. George Logistics (now STG Logistics) marked a significant milestone in his career, where he brought his expertise in strategy, finance, and operations to bear.
Geoff Anderman on the Art of Strategic Acquisitions
As President, CFO, and eventually COO, Geoff has been pivotal in shaping STG Logistics through significant acquisitions, most notably the Intermodal Division of XPO Logistics in March 2022. This acquisition, involving the transfer of 11,000 containers, significantly expanded STG's operational scope, far beyond just increasing assets. Geoff describes this as a crucial enhancement of STG's intermodal transportation services, including both drayage and door-to-door services.
The acquisition's success was largely due to Geoff's profound understanding of market dynamics and the company's strategic needs. He recognized an ideal opportunity to bolster STG's market position when XPO decided to split its business.
In acquiring Best Dedicated Services (BDS), Geoff ensured that the company met specific criteria: it had enough revenue to handle large network RFPs effectively but not so large as to overshadow STG's primary operations.
This careful balance guided his search and eventual decision, with Geoff conducting a comprehensive due diligence process to ensure the acquisition's viability and strategic fit with STG's long-term objectives.
Due Diligence in Acquiring BDS
When acquiring XPO's division and BDS, Geoff emphasized the importance of a thorough due diligence process. He explains that this involves two critical components: financial accounting and commercial viability. The financial due diligence, often assisted by a third-party accounting firm, involves a detailed analysis of the target company's financials to verify reported revenue and earnings.
Geoff notes, "This is what we think... It's not a full-blown audit. It's more like just looking at the sustainability of the profitability."
Equally vital is commercial due diligence, which focuses on customer relationships and their stability. In the transportation business, where alternatives are readily available, understanding the strength and depth of these relationships is crucial.
As Geoff puts it, "In transportation, it's essential to understand who's got the relationships, how strong are those relationships." This approach ensures that the acquired company's value is not only in financials but also in its established customer base and market presence.
Geoff on the Process of Acquisitions in Private Equity
Since joining STG in April 2017, Geoff has been a key figure in the company's expansion, leading it through 13-14 acquisition processes. His experience and insights shed light on the intricate mechanisms of acquisitions in private equity, particularly in the logistics sector. Below, Geoff outlines the step-by-step process that these acquisitions typically entail.
- Identifying a Target: Private equity firms (PE) identify a company (Company B) they want to acquire. Geoff uses the analogy, "Think about it a little bit like buying a house."
- Financing the Acquisition: PE firms put down a portion of the purchase price as equity and get a loan for the balance. Geoff explains, "I'm going to come up with probably 40 bucks of my own money and probably 60 bucks from the bank."
- Closing the Deal: The seller receives the agreed purchase price at closing. Geoff clarifies, "All you care about is I show up at the closing with 100 bucks."
- Clearing Debts: If the company being purchased has debts, part of the purchase price is used to clear these debts. Geoff states, "80 bucks is going to go to you."
- Earn-Outs and Incentives: To keep the seller motivated, the payout may be spread over time. Geoff notes, "I'm going to give that to you over time... I want you to still have skin in the game." This is key if you want that talent to stay with you post-acquisition.
- Character Assessment: Understanding the seller's character is "crucial to make sure you don't get screwed out of something," he says.
- Ongoing Acquisition Strategy: Geoff mentions STG is always on the lookout for acquisitions that expand or complement their services.
- Diverse Acquisition Portfolio: Geoff has led STG through numerous acquisitions, spanning different geographies and service areas.
The Importance of People in Logistics
Geoff firmly believes that success hinges on more than just technology; it's about having the right talent.
He emphasizes, "The business of moving freight is about who can provide the best service at the most competitive price," and the key to this is "having the best people."
These individuals respond swiftly and effectively to customer needs, ensuring on-time, damage-free deliveries at competitive prices. Geoff sees technology as an enabler, aiding staff in performing their tasks better rather than replacing the human element central to STG's operations and culture.
Navigating the Freight Market's Future
Geoff sees the current state of the freight market as "bouncing around the bottom," indicating a period of uncertainty but with potential for gradual improvement. His analogy of the market's condition demonstrates a cautious optimism: "Occasionally you might see something that you might think the nose of the plane has lifted a bit, but then you're like, eh, not so much." Geoff acknowledges the cyclical nature of the freight market and expects a slow return to normalcy, with consumer behavior playing a significant role.
M&A Activity in the Logistics Sector
Discussing the M&A landscape, Geoff highlights the impact of rising interest rates on acquisition activities, particularly for private equity buyers. He also points out the challenges in valuing companies post-COVID, as buyers and sellers grapple with fluctuating market conditions. Despite these challenges, STG remains active in seeking acquisition opportunities.
STG's Future Strategy
Looking forward, Geoff confirms STG's ongoing interest in strategic acquisitions, albeit with a more selective approach.
He concludes, "We are always looking at acquiring businesses that either expand our scope of services or complement our existing services or book of business...but we're a bit more choosey."
To get the full insights from Geoff Anderman's journey, tune into our podcast episode below.