Transfix to go public via SPAC in bustling year for digital brokers

Dive Brief:

Digital freight platform company Transfix will go public, via merger with special-purpose acquisition company G Squared Ascend I, at a value of $1.1 billion, the company announced. The transaction is expected to close in the first quarter of 2022.
As a public entity, Transfix, founded in 2013, will look to expand its service of connecting shippers with truckers and improving its TMS.
The transaction would give Transfix approximately $375 million in cash net of transaction expenses, the company said. That figure could change if G Squared Ascend I’s stockholders pull out and redeem their shares for cash invested, plus interest, which is fair game in SPAC deals.

Dive Insight:

"We believe that this is a huge opportunity for us to accelerate our growth, to continue investing in our technology and [artificial intelligence] machine learning capabilities and product development," Transfix CEO Lily Shen said.

Transfix is a digital platform that uses data analytics to connect shippers to transportation companies in a way that tries to wring out the inefficiencies that have long plagued the transportation brokerage industry.

"In the U.S., you have millions of shipments a year," said Christian Lee, the company's CFO. "You have 3.5 million trucks, half a million trucking companies, and the rise of truck brokers in the 1980s [following federal de-regulation efforts]. We use data science to match needs in real time, transparently, instead of relying on phone calls and pieces of paper."

The transaction would give the company more financing options, including for mergers and acquisitions down the road, but the company’s main focus is on organic growth, Lee told the Wall Street Journal.

Lee, the former CFO of WeWork, joined Transfix in January, where he immediately focused on plans for expansion.

"Where do we want to take some big bets? We’ve just launched two new software products: what are we doing to invest in those?" he told Transport Dive sister publication CFO Dive in April, adding that he was prioritizing healthy management of P&L and the balance sheet. "In the supply chain, lots of M&A will happen; there are lots of partnerships in the ecosystem, and massive changes are coming."

"Our vision, since day one, has been to build the world’s most connected and intelligent freight platform," Drew McElroy, company co-founder and board chairman, said. "This marks the next important step in advancing and accelerating toward that goal."

Transfix’s announcement is just the latest in the freight brokerage sector’s busy year, bustling with deals and acquisitions. This month, domestic freight broker Echo Global Logistics announced plans to go private, and in July, Uber Freight acquired logistics service provider Transplace for $2.25 billion.

Transfix expects to generate $281 million in revenue in 2021, and projects it will be profitable, on an adjusted basis, by 2024.

"We have not been chasing market share," Shen told the Journal. "We have been chasing the right solution, and finding the right moment and opportunity for us to scale. And that’s why we’re doing this transaction now."

In electing to go public via blank-check merger, Transfix is following a well-tread path. SPAC IPOs accounted for over half of the $67 billion in IPO capital raised in the U.S. last year, according to Goldman Sachs.

But as regulators and investors have scrutinized the process, the number of SPAC IPOs have dropped precipitously, plunging 87% from April through June compared with the first quarter of 2021, CFO Dive reported this summer. Thirty-nine SPACs raised just $6.8 billion during the second quarter compared with 292 that raised $92.3 billion during the first three months of 2021.