Sun Capital looks to accelerate growth of supply chain companies TTSI and Century

PE firms can help supply chain companies professionalize and modernize operations, make investments in new technologies and capabilities, improve internal processes and build scale, says Sun's Steven Liff.

In January, Sun Capital Partners bought Total Transportation Services, a provider of drayage transportation services with a presence at marine terminals and rail yards across the US. And now, PE Hub has learned, TTSI has closed on the acquisition of Marine Container Services, a family-owned, New Jersey-based business that provides drayage trucking, warehousing and chassis services. It’s the first add-on for TTSI under Sun’s ownership and the sixth acquisition since TTSI launched its M&A strategy in late 2019.

Sun’s investments in the logistics sector have been growing recently. Last June, the PE firm bought Century Distribution Systems, a global digital logistics provider offering supply chain management and freight forwarding services. PE Hub discussed Sun’s logistics investment strategy with Steven Liff, senior partner and head of private equity North America.

Why is Sun investing in companies that aim to solve supply chain problems? And please tell us about Sun’s two new platform companies in this sector.

We are seeing freight volumes at record highs, and we expect demand to remain elevated for several years. This increase has been fueled by the continued growth of e-commerce, especially during the pandemic. Now, with retailers and manufacturers looking to restock low inventory levels, we see a need for investment and operational improvement in a sector which has been highly fragmented.

TTSI is a leading provider of drayage transportation services in marine terminals and rail yards. Drayage refers to the trucking of cargo containers between a port/rail terminal and an inland distribution point.

Century Distribution Systems is a global, asset-light supply chain manager and freight forwarder. Century acts as a control tower for its customers with expertise managing complex supply chains at origin, particularly in Asia, where local know-how and relationships are critical to plan and coordinate the scheduling, movement and delivery of freight. Its solutions offer visibility to its customers to make better decisions in order to optimize speed and cost.

What does the private equity model bring to supply chain issues?

These companies have a similar value proposition to other service sectors, such as benefits of scale, benefits of expertise and outsourcing, high fragmentation, manual processes in need of optimization, and a need for technology investment. We see an opportunity to leverage the same operational toolkit that we apply in other service industries, and believe there are meaningful opportunities in consolidation, professionalization of processes and data analytics, investment in IT systems and automation, cost control and asset management.

How does TTSI’s acquisition of Marine Container Services embody Sun’s investment thesis in this sector?

As I mentioned previously, the supply chain sector is highly fragmented, so we see a number of opportunities with this add-on to build density for TTSI on the East Coast with a family-owned drayage business and cross-sell with TTSI’s current customer base. The Port of Newark is the largest marine port on the East Coast, and, together with the port in Savannah, Georgia, they are expected to be among the fastest growing ports in the US.

What are Sun’s growth plan for TTSI and Century?

We see a lot of room for consolidation. Just looking at drayage, the sub-sector in which TTSI operates, there are more than 2,800 drayage companies serving port and rail terminals, including over 100 in each of the top markets. TTSI has a proven track record with add-on execution and integration, having completed six add-on acquisitions since August 2019. They also have a number of advantages as a buyer, including a forward-thinking approach to environmental and labor dynamics.

At Century, we are expanding our operations across Asia to meeting the evolving demands of shippers as they grow their supply chains. We’re also expanding and optimizing our domestic services for customers who value a multi-service or end-to-end solution.

With both TTSI and Century, we see opportunities to drive performance improvement by optimizing capital and driving efficiency.

What’s the future for private equity-backed deals in this sector?

We’ve all seen the intense focus on supply chain dynamics over the past several years. It has really driven home the critical role that these companies play in moving goods globally and getting products to market. Beyond the capital that private equity can bring to the table, we think PE has a big role to play in helping supply chain companies professionalize and modernize operations, make investments in new technologies and capabilities, improve internal processes, build scale and accelerate growth.