By Keith Reid
PDI, a leading global provider of enterprise-class software solutions to the convenience retail and wholesale petroleum industries has been on an acquisition binge since September 2016. It seems like every few months there is a major acquisition announcement and not just of some small-scale technology facilitator, but of an established full-service peer. These acquisitions represent a range of motivations that include entering new markets (regional and business sector), acquiring new customers, acquiring new technologies and acquiring industry talent.
We spoke with PDI CEO Jimmy Frangis about the rationale behind these acquisitions and the processes and strategies at work tying the results together into what will be the future PDI.
But first, a review of the acquisitions and some other major, recent developments in chronological order, and as noted in various announcements.
- On September 6, 2016, PDI announced the acquisition of Intellifuel Systems, Inc., a provider of fuel management and logistics solutions for downstream and midstream participants in the fuel supply chain. Intellifuel provides solutions across the fuel supply chain market. Downstream, the company helps petroleum marketers automate the entire order life cycle. Midstream, they provide terminal automation systems, custody transfer, terminal and railcar scheduling, inventory position management and customer/stockholder portal solutions.
- On January 5, 2017, PDI acquired the enterprise resource planning (ERP) assets of what was arguably it’s largest near-peer competitor, The Pinnacle Corporation. This included intellectual property, development and support resources that paralleled PDI’s software offerings for retail automation, fuel supply chain, business intelligence and workforce management. Pinnacle’s customer base includes over 20,000 convenience stores across the U.S.
While not an acquisition, on March 29, 2017, the company released PDI/Payroll that eliminated the need for multiple products and enabled users to simplify the payroll processing experience with a single solution that connects every step from time tracking to check distribution. A few days later, on April 4, 2017, PDI announced the acquisition of three companies:
- With established operations and customers with over 30,000 sites in over 50 countries, DataMax Group Inc. provides convenience store back office software and services for retail fuel stores including major oil companies. Their scalable software allows both multi and single store operators to improve control and manage operations more efficiently.
- Based in Germany, LOMOSOFT provides secondary fuel distribution customers with more than 27 years of deep logistics and carrier industry network expertise. It expands PDI’s footprint into Europe to 38 countries and adds robust logistics capability to PDI’s portfolio of offerings in the area of wholesale logistics and fuel supply chain.
- Focused on wholesale petroleum companies serving over 170 clients selling more than 20 billion gallons of fuel per year, FireStream Worldwide provides end-to-end software for downstream and midstream jobbers, lubricant suppliers and propane marketers.
On September 13, 2017, PDI introduced a new brand identity, which was spearheaded by PDI’s Chief Marketing Officer Nadine Routhier. The logo pays homage to the stylistically unique lettering of its predecessor, signifying the company’s stability and 34-year reputation in the industries it serves. The accompanying sphere, which features a series of connecting dots and arcs, symbolizes the flexibility of PDI’s solutions and the company’s commitment to building a thriving, global ecosystem of customers, partners and products.
“There’s never been a more exciting time to be at PDI,” said Routhier in the announcement release. “I’m so proud of the results we’ve achieved by collaborating with our customers and employees. Not only is our new identity visually compelling, but it reinforces our mission to help create an unparalleled, service-centered experience for our customers that supports their business and drives their growth.”
The end of 2017 and start of 2018 brought more acquisitions.
- On November 1, 2017, PDI acquired TelaPoint from WEX Inc., a provider of corporate payment solutions for fleet operators. As a leading provider of fuel supply chain management software, TelaPoint’s software enables convenience retailers and petroleum outlets to improve the efficiency of their fuel replenishment, buying and administrative operations. TelaPoint manages inventory, dispatch and fuel pricing for 77 customers around the globe, 150 carrier companies and 67,000 sites.
- On January 8, 2018, the company acquired TouchStar Group LLC, a multinational logistics automation company. The acquisition expands PDI’s product offerings into enterprise mobility software and automation systems, which transform business productivity in the oil and gas, transportation and aviation operations industries. TouchStar’s web-based integrated platform helps customers simplify the management of fleets and mobile enterprises around the world. TouchStar’s global customer base and infrastructure, and its sophisticated mobility and fleet automation solutions, complement PDI’s comprehensive logistics solutions suite.
- On April 11, 2018, rumors that loyalty provider Excentus was potentially in play were confirmed when PDI acquired the company. Excentus is a provider of loyalty and coalition marketing solutions for the U.S. retail, grocery, national brands and convenience retail segments. This adjacency expansion complements PDI’s enterprise software solutions while broadening the company’s capability to serve customers better. In addition, it added over 600 new customers to PDI’s roster and allows PDI to deliver comprehensive, enterprise software technology and data solutions—adding another facet to PDI’s suite of ERP and back-office solutions.
- Finally, at least as this article goes to print on May 30, 2018, PDI has acquired DM2. Founded nearly 30 years ago, DM2 provides back office enterprise resource planning automation solutions for over 200 customers. The company has been a leading supplier of technology to wholesale petroleum marketers in the U.S. PDI will acquire DM2’s intellectual property, development and support resources—strengthening its overall operations with cardlock and lubricants knowledge being specifically noted. The acquisition will also provide PDI with a regional presence on the U.S. West Coast to better service customers in that area.
Although these were acquisitions, we have referred to them in the present tense they all are listed as independent solutions at the PDI website (at least for the time being) and are largely still being maintained as such. That will undoubtedly change over time.
Helping finance this growth were investments from TA Associates starting in 2016 and, later, Genstar Capital.
“Since beginning our partnership with the PDI management team in May 2016, PDI has successfully executed against its growth strategy, rapidly accelerating topline revenue growth, delivering significant levels of product innovation and deepening its presence in international markets,” said Hythem T. El-Nazer, managing director, TA Associates.
That sentiment was echoed by Eli Weiss, managing director, Genstar Capital. “Genstar focuses on identifying market leaders in the software sector and we believe that PDI has established an unmatched presence in the market for more than 30 years,” Weiss said. “We are confident that the breadth of PDI’s current portfolio along with the potential for expanding its existing services and software offerings will bring a new level of experience to the industries and the customers it serves. Our added capital and resources in partnership with TA Associates will provide PDI with the means to further develop their technology and allow for strategic add-on acquisitions that we believe will meet the needs of a rapidly changing market.”
Now, on to the interview.
FMN: What drives your acquisition strategy?
Frangis: We look at the needs of the industry. Then we look at the solutions we have in-house, examine where we have gaps and determine whether we want to fill those gaps through acquisitions or our own R&D budgets.
FMN: Traditionally, PDI has been seen as a leader in retail, in-the-store back office/ERP solutions. While there are some significant retail-related acquisitions, a tremendous part of the activity has been related to the wholesale fuel side.
Frangis: PDI’s heritage is more on the retail side of the business. We’ve got very strong solutions there, so we needed some more capabilities on the wholesale and logistics side, and that’s why you’ve seen some of the investments we’ve made in that area the past 18 months. I’m not suggesting we’re done there, but we’ve made a lot of progress. Now we’re in the throes of the integration process and increasing the efficiency of our investments and putting the investments in the right platforms going forward is a big part of that. So, there’s a lot of emphasis there on the wholesale and logistics side, and we’re working very closely with all of our customers on that.
FMN: With a full portfolio of solutions, PDI would seem to be positioned, now, to serve virtually any of the more common retail/wholesale business models in the industry.
Frangis: We had a bunch of customers who were primarily retailers that might have had a wholesale business as well, and we felt like there was an opportunity to serve those customers more holistically. And then there was this whole swath of the industry that we weren’t serving at all because they were wholesale only or wholesale-centric. So, the investments we’ve made both through acquisitions and through our organic R&D have now given us the capability to serve a jobber that is exclusively wholesale with a fleet of trucks they own and manage, or a dedicated retailer or a combined operation. That was a big part of what we were trying to do.
FMN: PDI has had such a strong retail brand—what is the brand message moving forward with the new wholesale facing?
Frangis: We believe there is a lot of strength and power in the PDI brand. So, we have focused on that brand. Certainly, some of the companies that we’ve acquired have strong recognition in the market as well. The way we’ve handled some of those brands is we’ve retained them as more product line or solution brands. But we believe, especially here in the North America market, that PDI has a really strong brand, a good reputation for serving customers, and we believe that carries forward into the wholesale market as well.
FMN: Pinnacle was obviously an earlier and very big move on the retail side, and one we’ve covered previously in FMN. The loyalty provider Excentus was a more recent pick up, and provided a retail-focused acquisition to complement the wholesale activities.
Frangis: Even though we’ve been focused a lot on wholesale logistics, our roots are in retail and our strength has always been in retail. We’ve got a great customer base in North America with really strong solutions, and we always want to enhance the position in retail. So, loyalty was just a natural extension. The convenience segment is investing in loyalty solutions today industry-wide. We felt like there was an opportunity to acquire and then partner with that business to deliver a best-in-class loyalty solution. When you add that to our ERP and retail back office software, you create a compelling combined offering. It was on our list of areas to look at, and when the opportunity came up with Excentus we felt like it was a good match at the right time.
FMN: How does this acquisition align with customers that might want to use an alternative loyalty program?
Frangis: We would like to build a compelling offering where our customers see the value in leveraging our full portfolio. However, we completely realize not everybody’s going to do that. So, we will remain open in the same way we’re open on the logistics side. We have implementations where our ERP software is integrated into third-party logistics solutions. The same thing with financials. We’ve got our retail back office integrated to third-party financial applications, even though we offer all of those. At the end of the day, we’re going to serve the customer. And if our customers have a competing solution and they need us to support them, we’re absolutely going to do that.
FMN: What are some of the unique capabilities the various acquisitions brought to the table?
Frangis: As discussed, we’ve done a lot of investment in the wholesale petroleum and logistics area, and TelaPoint and TouchStar both fit into that category. Before that, we did FireStream and Lomosoft, the latter of which gave us capabilities in Europe.
TelaPoint gave us a really strong North America-focused dispatch solution along with a tier one customer base that we can continue to serve here in the U.S. But again, more North America focused.
If you look at TouchStar, that helped us in two areas. One, they’re a very global business, and they have a significant presence in Asia Pacific. They have a large office in Sydney, Australia, and service the Asia Pacific region out of that office. They’ve got a presence in Europe and also a presence here in the U.S. Their real strength from a technology standpoint—and they’ve got a great solution across the board—was in the mobility solution, which is the in-truck.
When you think of logistics there’s the home office solution, which entails dispatching. Then there’s the in-truck piece, which is the technology the drivers use to manage their interactions back to corporate, etc. So, we think it gave us best-in-class, in-truck capability. It also gave us a more significant presence outside of the U.S. as we continue rounding out our portfolio to be an enterprise management solution provider to the convenience retail and wholesale petroleum markets globally.
FMN: Technologies that support electronic logging devices (ELD), geofencing and telematics are often provided to fleets by more generic fleet solution vendors. How do your solutions compare and what can be gained by integrating this support into a centralized solution?
PDI products leverage geofencing and telematics primarily as a function of updating order status and driving freight calculations, which is very specific to our solutions and not available in generic platforms. As it relates to ELD, we have partnered with KeepTruckin, a San Francisco-based company backed by Good Ventures. KeepTruckin has a robust application programming interface (API), and we are working now to leverage ELD data inside other PDI applications.
FMN: In covering the Pinnacle acquisition, and then in various discussions and materials released relative to the current acquisitions, PDI seems to have a gradual strategy. At the start, by and large the acquisitions will remain independent solutions, but over time they will morph in various ways into a more unified package that perhaps still uses (in some cases) the original brands as sub brands. Is that an accurate summary?
Frangis: I think that’s a fair assessment of how we treat a technology solution when it comes in through the PDI portfolio. We try to look at it through the lens of the customer, and we try to understand their needs with that solution in its lifecycle. Our goal is to be smart about how we are investing in all the solutions in our portfolio.
Generally speaking, with each acquisition there is a specific product strategy that addresses how it fits in the overall portfolio. In some cases, we are consolidating features from one product into another. Over the long-term, as PDI further develops its cloud offerings and international presence, the acquired products will converge as global products under the PDI brand with localized features.
This is all about us serving the customers and providing them with a technology solution in a roadmap. We want them to be confident that they can continue to utilize our solutions well into the future.
I should say one key tenet in all of that is our team. We’re certainly getting good technology solutions, but more importantly, we’re getting good team members. We’re getting folks who know the industry, know the customers, know the solutions and are excellent at serving the customers. So, we’re trying to bring those teams in, ensure they understand the vision of the business, are excited and engaged about that vision and continue to serve their customers really well.
FMN: Considering the number of acquisitions in the past 18 months or so, it has to be a fairly exciting time to be working at PDI, to say the least. How do you handle what might seem from the outside to be a fairly overwhelming process with bringing all of these entities together, then sorting things out?
Frangis: Certainly, integration can be challenging. We try and set certain principles in place when we embark on an acquisition and integration. Some of those principles are around how we treat our people and how we treat our customers and fulfill commitments. Then we bring teams together that are building like solutions and ensure that there’s good alignment around the direction for those solutions. I’m not going to say that we’re perfect at it, and I can’t say there are no bumps along the way—there certainly are. I would say, generally speaking, the integrations have gone well, and we’ve got a really good team that’s excited about the direction of the business and excited to continue to serve our customers.
I think one of the things our team members see is that we are investing heavily. And that is not just with acquisitions, but even more so with our own R&D budget. Ultimately, team members get excited about doing a good job for customers. They love delivering good value to customers, getting good feedback and seeing customers utilize the solution and get the benefits they were expecting.
FMN: As a bit of a sidetrack, one component of the TouchStar acquisition was its cloud-based technology—hardly the buzz it was a few years back—and that is something that PDI has also provided. Yet a lot of solutions are still implemented on the customer’s server. How do you see this technology trend playing out over time?
Frangis: Clearly, there’s a movement towards more cloud-enabled or cloud-delivered solutions versus on-premise solutions. We’re seeing that with some of the business we’ve acquired, but we’re also seeing that in our core business. We’re hosting probably 40 percent of our core PDI enterprise solution customer base and delivering that solution via our cloud environment. And I’d say probably seven out of every 10 new customers that make the decision to license our technology elect to have it delivered through our cloud infrastructure. So, it’s definitely a growing trend. I think there are some really good reasons behind it. There are some good efficiencies that our customers can gain, and it also gives us an ability to help manage that migration of technology over time too.
FMN: Several of the acquisitions reflect a growing international focus for PDI. What are some of the commonalities and some of the differences between how the industry goes to market in the U.S. versus overseas?
Frangis: A lot of the same challenges exist on the wholesale side—the visibility into fuel inventory through the supply chain and better management of that fuel supply chain. Obviously, the world’s a big place, and different geographies can be a little bit different, but you do see fully integrated or more vertically integrated companies outside of North America. Here, there’s a very distinct wholesale market.
But that’s changing too. There’s a lot of consolidation in the market. I think that the key thing we try to focus on is solving the business problems, and on that wholesale side, there are inefficiencies in the supply chain and poor visibility and we’re working hard to solve that. And that is relevant regardless of the specific business model in place in each geography.