Flexport Could Scoop Up Convoy’s Tech
Convoy’s technology could end up in the hands of a new buyer.
Flexport, the digital freight forwarder and a Convoy partner since 2018, is in talks to buy the defunct trucking marketplace’s technology stack, according to the Wall Street Journal.
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The Seattle-based business suspended operations and laid off 533 workers last week after trying to find a buyer or investor for four months, according to Convoy CEO and co-founder Dan Lewis.
In a LinkedIn post Wednesday, Lewis said he’s been “heads down working on a deal that will include some of the Convoy team and our tech/services.”
As part of the potential deal, Flexport would bring on a small team of business, product and tech experts from Convoy, although no number has been reported. If Flexport acquires the technology, it would plan to restore Convoy’s trucking services for as many customers and partners as possible, the report said.
Sourcing Journal reached out to Convoy and Flexport for comment.
Convoy and Flexport are complementary businesses. They launched a shared data exchange in 2021 to integrate shipments across their platforms. While Flexport already offered solutions for trucking, the acquisition of Convoy’s technology would position it further into the U.S. domestic trucking market.
Flexport tried to build out its trucking services prior to cleaning house in September when founder Ryan Petersen returned as CEO after the abrupt departure of his then-successor, Dave Clark. In May, the company hired Bill Driegert, a former Amazon executive who most recently led operations at Uber Technologies’ freight division, to establish the service.
Ironically, at the time, Clark told the Wall Street Journal that Flexport wasn’t looking to expand the trucking business via an acquisition. But with Convoy up for grabs and Petersen back in charge, Flexport’s priorities continue to shift.
Both companies received high valuations in 2022 after lofty venture funding rounds, with Flexport exceeding $8 billion and Convoy reaching $3.8 billion. But a collapsing freight market clipped their revenue and kept profitability out of reach.
Merging the two technologies would when freight tech has fallen on hard times. The economics of running a digital freight brokerage haven’t been favorable when capacity is still high but freight rates have fallen dramatically, according to Ken Adamo, chief of analytics at DAT Freight & Analytics.
“It’s a pretty commoditized industry. Brokers don’t have a ton of ways to differentiate themselves. The main way they can is price and service,” Adamo told Sourcing Journal. “If you’re a digital broker and you’re trying to get shippers to change their behavior and tender you the freight digitally, the main incentive lever you have to offer them is better pricing. So you offer them a great price for equivalent service and they come with you, but what happens is you’re now buying below market prices and covering at market prices, which is a problem.”
The current market thwarted Convoy’s chances of getting acquired by major logistics players. The Information reported that C.H. Robinson and J.B. Hunt’s interest in Convoy dried up in recent months.
The technology would be the highlight of any Convoy deal. Flexport would not acquire Convoy’s business or physical assets such as truck trailers or real estate, according to the WSJ report. Flexport also wouldn’t be responsible for Convoy’s liabilities under terms of the deal under discussion.
Since raising $260 million just 18 months ago, Convoy had slashed jobs several times, closed an office in Atlanta, and saw co-founder Grant Goodale step away from his role as chief experience officer.
Convoy’s app is designed to automate the pairing of shipments with carriers—effectively saving money for shippers, while reducing the legwork and hassle for carriers in finding loads to transport. Truck drivers who downloaded Convoy’s app could find work without going through brokers who typically use emails and phone calls.
A potential integration of the Convoy tech also would come as Flexport is working to prioritize customer service. Earlier this month Petersen said the freight tech firm sees “endless opportunities for technology to improve on-time performance and reliability, upgrade compliance processes, and save businesses money in their global supply chain.”
If Convoy’s tech goes to Flexport, it would join some of the freight forwarder’s new offerings. Flexport recently launched two new supply chain tools—an end-to-end supply chain platform for SMBs called Revolution, as well as a $149 per month membership program, Flexport+.
