Growth investor FTV Capital is investing $180 million for a majority interest in procurement services and technology services provider LogicSource Inc.
FTV backed LogicSource out of FTV VII, which closed last month with $2.3 billion and was the firm’s largest fund raised to date.
Norwalk, Conn.-based LogicSource, which has clients that include Canadian apparel company Lululemon Athletica Inc. and educational publisher McGraw Hill, helps companies buy things they need to operate more “efficiently and effectively,” according to founder and Chief Executive David Pennino. These outsourced goods and services can absorb 20% of an organization’s revenues and include marketing, information technology, facilities and logistics management, packaging and professional services, Mr. Pennino said.
According to Mr. Pennino, LogicSource generated more than $60 million in annual revenues over the last two years, growing at 46% a year. It currently processes more than $60 billion of spending for its clients, an amount that is expanding by $10 billion to $15 billion a year, Mr. Pennino said. The company also built an automated software-as-a-service platform that addresses tasks such as contract management, procurement payment and project management, as well as analytics around an organization’s data and spending, he said.
San Francisco-based FTV is at least the third private-investment firm to support LogicSource. Boston-based Bain Capital Ventures backed the company in 2009, when it was “just an idea” and exited in 2019, when Puerto Rico-based Pegasus Growth Capital invested in the business, Mr. Pennino said.
LogicSource initially targeted physical retail stores for its services, but lost $14 million of revenues to retailers that went bankrupt during the pandemic, according to Mr. Pennino.
“Covid probably did us a favor,” he said, adding that the pandemic forced the company to diversify into the consumer packaged goods and healthcare sectors.
FTV Managing Partner Brad Bernstein said the firm invested in companies that benefited from outsourcing for more than two decades. Prior investments in the sector include New York-based ExlService Holdings Inc., a data analytics and digital solutions company; and Colombia-based Lean Solutions Group, which provides outsourced solutions for transportation and logistics companies in the U.S.
“When you look at all the functions that have been outsourced, one of the last big areas that is desperate for best practices is procurement,” Mr. Bernstein said.
The FTV partnership will help LogicSource expand into more sectors, build both its team and product line, and acquire more companies to expand its services internationally, Mr. Bernstein said. For now, the firm will focus on expansion in the U.S., he said.
FTV will also work with a global partner network of more than 500 financial services industry executives to help LogicSource accelerate its expansion into financial services, including the private-equity industry, Mr. Bernstein said.
“We already are working with a number of sponsors where they’re doing large buyouts, and they want to figure out where there are cost savings in these new acquisitions, where they’re trying to squeeze margins or at least mitigate inflation,” Mr. Bernstein said.
Source: Mint