Vista Equity Partners is still trying to sell Omnitracs, the fleet management software and hardware company it acquired for $800 million in a November 2013 leveraged buyout. After two canceled deals in December 2015 and June 2017 – in that second deal, Vista rejected a $2 billion offer from strategic buyer Continental Tire – Omnitracs is again entertaining bids.
Now Omnitracs is in its second round of talks with potential acquirers, and Goldman Sachs (NYSE: GS) is still in the running. The size and terms of Goldman's offer have not been disclosed. FreightWaves has learned that Vista's asking price for Omnitracs is still $2 billion, and that potential buyers at the table are having a hard time getting to that price. Omnitracs' gross revenues are in the $400-500 million range.
Omnitracs CEO Ray Greer to did not respond to an email request for comment.
Omnitracs provides electronic logging devices (ELDs), route optimization, GPS fleet tracking, critical event video, and reporting and analytics for trucking carriers. An investment banker not involved in the current negotiations told FreightWaves that Omnitracs has received steady inbound interest from a number of parties.
Known for its early dominance of the large fleet market, Omnitracs integrated with sophisticated devices embedded in the truck that generated reams of data from components and transmitted it back to carrier headquarters. But Omnitracs was caught off guard by how the fleet technology market evolved following the ELD mandate of December 2017 and the hard enforcement, which began in April 2018.
Younger upstarts focusing on the long tail of small carriers and owner-operators and offering low-cost, nimble ELD and visibility solutions – often in the form of mobile apps – experienced rapid growth and lapped Omnitracs among down-market customers.
Part of Omnitracs' failure to adapt may have been caused by the business imperatives it faced after it was bought by Vista Equity Partners. When private equity firms acquire companies through a leveraged buyout, they use a small amount of their own capital and borrow the rest from banks, leaving the acquired company saddled with the debt. Omnitracs would have had to pay off the debt with its free cash flow or by cutting costs.
That's not a favorable position for a legacy technology company – Omnitracs was founded in 1985 – on the cusp of an industry transformation to be in.
In the meantime, KeepTruckin, Samsara and BigRoad emerged with a low-touch, low-cost model and took the small fleet market by storm. Venture capital-backed KeepTruckin in particular seized the opportunity presented by the ELD mandate, exploding its valuation from $68 million in May 2017 to $1.25 billion by April 2019. Samsara followed a similar trajectory – after its May 2015 Series A, Samsara was valued at $115 million post-money; after its December 2018 Series E, Samsara's post-money valuation had ballooned to $3.6 billion.
After two canceled attempts to sell Omnitracs, Vista brought in transportation and logistics veteran Ray Greer to fill the CEO role in February 2018. Greer had a storied career at a number of logistics companies including Ryder and FedEx and had most recently been the president of BNSF Logistics.
Shortly thereafter, Vista refinanced Omnitracs' debt, borrowing an undisclosed amount from Barings and Apollo Investments.
There are a couple of courses a new buyer could take. One would be to continue cutting costs, using the cash to pay down the (new) debt, and sell the company again after improving its balance sheet.
"You can get great returns just by buying a slowly melting ice cube and paying down the debt," said Seth Holm, senior research analyst at FreightWaves.
The other approach would be to invest in the business, improve the analytics offering and find new data customers, and build new mobile-native software products that can be adopted with less friction.
It's still unclear how the current bidding process will play out for Omnitracs, but FreightWaves will keep watch on it.
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