Descartes’ recent acquisition of 3GTMS has brought renewed attention to a growing concern among shippers: what happens when your trusted software vendor is acquired? With M&A activity showing no signs of slowing, especially in the supply chain software sector, shippers using TMS platforms and point solutions need to be prepared. Financial due diligence and proactive risk management are no longer nice to have, they’re now essential.
The Sustained M&A Dynamic in Supply Chain Software
Any company utilizing supply chain software has likely experienced at least one, if not many, trusted vendors being acquired or merged with another organization—those transactions may not slow down in the future. ICON reports there were 141 supply chain software mergers and acquisitions in 2024, 46% of which were private equity (“PE”) sponsored. A number of these deals focused on TMS and logistics software.
The supply chain software market continues to attract investment for several reasons:
- The industry’s growth is historically strong and is predicted to double by 2028
- On average, these companies tend to outperform the broader tech market, indicating strong financial health
- The software enables shippers to deliver mission-critical supply chain outcomes necessary to operate and compete in an increasingly complex, regulated, and dynamic environment
Many companies in this space are ripe for acquisition—point solutions for their customer lists and niche IP, PE-held vendors who’ve delivered their expected ROI, and venture-funded companies facing "down rounds” with slashed valuations, and limited cash runway. Given the proliferation of VC funding in supply chain software, combined with a host of point solution start-ups, there is no shortage of vendors for buyers to target.
Given the prediction of sustained growth in the industry, it’s safe to assume investment in TMS and logistics software will continue in the years to come. What does this mean for logistics leaders who are tasked with ensuring their technology and systems ecosystem is durable and low risk?
The Impact on Shippers
Shippers, especially those using point solutions or mid-tier vendors, should assume that at least one of their vendors will be sold in the next few years. The acquisition of a TMS vendor creates both opportunities and threats for its customers.
Strategic acquisitions made by another supply chain management vendor aim to strengthen market position and competitive positioning through broader end-to-end product capabilities and integration, access to new markets, consolidation from competitor acquisition, and added industry and domain expertise.
In addition to access to these integrated solutions, shippers may benefit from accelerated product improvements as a by-product of improved financial stability (especially when the acquired vendor is a point solution).
"Shippers, especially those using point solutions or mid-tier vendors, should assume at least one of their vendors will be sold in the next few years."
On the flip side, immediate product integration may stall previous roadmap commitments. It’s not uncommon for the vendor’s support, account management, and ‘back office’ quality to suffer as teams, culture, systems, and policies merge into the new company’s structure and resource allocations change.
Overlapping or obscure product capabilities are rationalized, potentially leading to forced migrations, reimplementation, or sunset support. We saw this when Trimble sunset Kuebix before FreightWise stepped in.
When an acquisition is sponsored by a PE firm, focus tends to be on financial and operational performance, enabling the PE firm to successfully exit after 4-7 years on average. PE firms offer vendors access to expertise and capital to fuel organic and inorganic growth, both of which can benefit shippers through improved capabilities and client experience.
However, the risk of instability from subsequent sales/mergers and possible shift from product innovation to profit optimization are high.
Proactive Strategies for Shippers
As strategic advisors to both shippers and PE firms, JBF brings unique insights into vendor risk assessment within the supply chain software landscape. Our expertise comes from regularly conducting comprehensive financial and risk analyses of software vendors across the logistics ecosystem. Drawing on this experience, we recommend that shippers take the following proactive steps to protect themselves against disruption when a vendor undergoes a change of control.
Vendor Financial & Risk Assessment: Inventory all technology vendors and assess basic financial health using public earnings reports, press releases, and sources like Crunchbase. Next, assess the relevance the vendor has in the market and to your specific business. Use these details to assign risk and relevancy scores to vendors. Does your tolerance for risk support the amount of risk in your vendor landscape?
Financial health
- Current and former ownership; date of last change of ownership, if any
- Funding history and runway
- Revenue growth and profitability
- Cash flow from operations
- Debt levels
- R&D investment
- Risk of future sale
Market & shipper business relevance
- Vendor sentiment from peers and research analysts
- Product strategy and roadmap and the potential for improving your business outcomes
- Partner ecosystem strength
- Press about noteworthy product or partnership launches
- Solution criticality - Mission critical or nice to have?
• Business process coverage and impact
• Impact on regulatory compliance - Contractual obligations and protections – what protections does your company have in the event a vendor is failing to meet their legal commitments? Do you have flexibility to pursue alternative vendors with minimal notice in the event your provider is declining?
Establish and Maintain Strong Vendor Relationships: Software vendors are not commodities, rather enablers to improve business outcomes. Shippers should establish and maintain regular vendor engagement with a focus on critical vendors to maximize the value of technology and to benchmark vendors pre- and post-acquisition.
- Establish executive-level relationships beyond account management
- Participate in customer advisory boards when possible
- Establish recurring business reviews
• Strategy and product roadmap
• Performance and success metrics
• Expansion opportunities
• Upcoming shipper business changes/strategy
• Market insights and industry trends
- Create mutual value
• Position yourself as a reference customer when applicable
• Participate in product discovery, design, and feedback requests
• Participate in case study or white paper development - Leverage relationships during post-acquisition transitions
• Gain early insights into production rationalization and impact
• Understand organizational and leadership changes
• Influence product integration and roadmap
• Receive recommendations on integrated/combined product opportunities tailored to the shipper
"Be proactive, be informed, and never assume that today’s trusted software partner will look the same tomorrow."
Conclusion
The risk of disruption from M&A activity is real. Shippers can no longer afford to take a passive role. By actively assessing financial risk, fostering strategic relationships with vendors, and demanding transparency, businesses can protect themselves from being blindsided and even leverage acquisitions to their advantage.
The bottom line? Be proactive, be informed, and never assume that today’s trusted software partner will look the same tomorrow.
