The Acquisition In-Brief
Last week Körber AG announced that it had acquired HighJump. I first became aware of Körber in 2014 when the German holding company acquired Inconso, a German supply chain software provider. At that time, Inconso was a complementary addition to Körber’s other Intralogistics businesses, but was distinct in its focus on commercial software. Shortly thereafter, Körber expanded its software portfolio with the DMLogic acquisition. Now with the HighJump acquisition, Körber has greatly expanded the software segment of its Logistics Systems business. Körber AG is owned by the Körber Foundation, and as such, is not subject to the rigid investment time horizons often imposed by private equity firms. This provides additional latitude for post-merger integrations, strategy development, and product development roadmaps. In my opinion, the acquisition provides numerous growth opportunities, or potential “synergies” to the company. However, as with any acquisition, proper execution is essential to realizing these synergies.
Körber Logistics Systems
Körber’s Logistics Systems business includes two European-based warehouse automation systems integrators, a palletizing provider, a depalletizing solution provider, and the software businesses Aberle Software, DM Logic, Inconso, and HighJump. As I noted in previous LV posts, warehouse automation and warehouse software companies are being acquired due to the high growth rate of the warehousing technology space that is itself being propelled by the e-commerce boom. Körber is likely focusing on warehousing technology due in large part to this secular growth it is experiencing. Operationally, Körber tends to allow its portfolio companies to function as independent entities, but provides opportunity for cross-pollination in areas such as strategy and research and development. However, the software companies within Körber Logistics are expected to become more closely integrated. In particular, the businesses of HighJump and Inconso is where I see the greatest opportunity for growth synergies.
There are multiple ways in which the HighJump acquisition creates growth opportunities for Körber. Geographically, the companies are an ideal match with little overlap. Inconso is a well-established WMS and WCS provider to companies in Germany and other countries in Western Europe, but has limited presence in the North America market which is growing more quickly than Europe. At the same time, HighJump is well-established in North America but has limited presence in Europe. The combination of HighJump and Inconso also allows the combined entity to meet the needs of a wide range of warehouse complexity and throughput requirements. Western European warehouses are among the most heavily automated in the world and Inconso meets the needs of these operations with its integrated WMS/WCS solution set. These warehouses are often large facilities with high throughput and large capital investments. HighJump typically sells its Warehouse Advantage solution to companies that are running moderately complex manual or partially automated warehouses. These facilities have lower throughput than the large automated warehouses Inconso often supports. In addition, HighJump offers a WMS product for small to medium sized businesses and another designed for the needs of 3PLs. Furthermore, HighJump and Inconso offer additional complementary applications including TMS, labor management, yard management, and planning solutions that together can strengthen the company’s position in large platform deals.
Other Logistics Systems Businesses
Allowing the software businesses to operate autonomously ensures that the software companies will remain focused on their current customers and product development strategy. But it could also hinder potential synergies. There is a history of WMS software failing to flourish when combined with warehouse automation businesses. But more recently the trend appears to be reversing, as warehouse automation providers have seen their warehouse automation and mechatronics offering become commoditized while differentiation is increasingly being defined by the intelligence of the overarching software systems, including WCS, WMS, and facility-wide analytics. Körber has an opportunity to create a highly competitive global intralogistics offering if it can harness and integrate the individual strengths of its Logistics Systems businesses.