Redwood Logistics heralds new investment partner in AEA Investors

Earlier this week, Chicago-based supply chain and logistics services provider Redwood Logistics announced a new strategic investment from global investment firm AEA Investors.

Terms of the investment were not released. Going back to 2016, Redwood has been part of CI Capital Holdings investment portfolio, and it said that over that period it more than tripled in size through the pairing of strategic acquisitions and organic growth efforts.

Redwood officials said that AEA and Redwood Logistics CEO Mark Yeager and President Todd Berger—and its existing management team— are focused on driving future growth initiatives, adding that AEA is poised to commit “substantial resources,” for future initiatives.

The company also pointed out that in May 2021 Redwood rolled out its Logistics Platform as a Service (LPaaS), which it described as an interconnected and open platform, with a focus on effortless scaling and logistics network design. And it added that it also leverages Redwood Connect, the company’s proprietary iPaaS platform, geared towards facilitating a single cohesive digital and physical supply chain that changes and evolves in tandem with its customer base.

In an interview with LM Group News Editor Jeff Berman, Redwood CEO Yeager provided an overview of the company’s relationship with AEA and other topics. Their conversation follows below.

LM: What drove the need to partner up with AEA and how do you view your relationship with CI over the last few years?

Yeager: We have had a great relationship with CI, which started back in 2016, and Redwood entered the picture at the end of 2017, early 2018, when it partnered with Simplified Logistics. They have been a tremendous partner and helped us grow. Redwood was around a $275 million company when this all started, and CI helped us take it to about $1.2 billion. It is pretty exciting and a great growth story, with half of the growth organic and the other half through acquisition and around a 30% compound growth rate. CI has been really instrumental with that. It is now year four of CI’s investment cycle and as private equity works, when there is an opportunity to make an exit that has a great return for everyone, they typically seem to take advantage of that. CI is selling its [Redwood] interests to AEA and are our new financial sponsor. We are super-excited about it. AEA has followed us for about four years…and I think they heard what we had planned and then they actually saw us execute on it. They are experienced and well-established, and there seems to be a great cultural fit. They seem to share our vision and are really in a position to help us accelerate growth through further investment[s].

LM: What are the next steps, in terms of Redwood’s growth plans?  

Yeager:  It is really a continuation and acceleration of what we have been doing, and that has been about investing in our business lines. We have been diversifying our business lines and have become more of a full-service provider. And we have been investing in our team and bringing in some amazing talent…that have really helped us strengthen the team. Another area is technology. We have really stepped up our investment in technology. At the core of LPaaS is Redwood Connect, our no code integration tool, which we have really invested into in a big way. What this enables us to do is step up the level of that internal investment and then also step up the pace and size of potential acquisition activity. It allows us to step into bigger deals potentially, add new services and scale and talent and get more for our customers at the end of the day.

LM: What are the primary customer verticals Redwood Logistics serves?

Yeager: We do a lot of food and beverage, CPG (consumer packaged goods), a fair amount of healthcare, and a lot of light industrials. These sectors are not very cyclical, and we do not have the high dependency on the holiday peak and things like that. We are pretty nicely balanced, and we don’t have any single dependency on any particular vertical. It is a diversified customer base.

LM: What are the key differences between Redwood Connect and LPaaS?

Yeager: LPaaS is really our operating model…so what we are really doing there is we are taking these executional capabilities of a full-service 3PL and combining it with these proprietary tools, first and foremost being Redwood Connect. And when we put those two together, we are building an open ecosystem for our shippers. What that means is that the shipper is—in an a la carte fashion—able to decide the carriers, the data streams, and the technology they want to integrate into their supply chains. It allows them to mix and match the best solution for them. If they are on a TMS, for example, and they want to integrate better with their parent organization, we can do that. If they don’t love the visibility, they are getting out of the dated applications in their TMS and want to use, for example, project44, we can do that for them. The same goes for a different consolidation engine or wanting to partner with substantially more carriers than they traditionally have because they think it is a successful strategy in a disrupted environment. We can make that all happen without the traditional heavy lifting associated with conventional integration and with lower costs as well. What that does is allow even mid-sized shippers to do things that only the most sophisticated shippers with significant resources would do in the past. It really is a gamechanger.

LM: What are some other growth initiatives Redwood is focusing on moving forward?

Yeager: We are really excited. Our motto for next year is “All In,” meaning our entire management team and the entire Redwood family is entering 2022 with tremendous momentum and are very enthusiastic about how we navigated through a very challenging situation. We feel like we are a very strong player and starting to get the recognition for that. We are opening up a whole world of new customer relationships, and I think as we continue to invest, we are getting real tangible benefits out of those investments, whether it is for our team or our technology. We are a better company not just a bigger company, and I think that is creating a lot of enthusiasm within our organization. With this new partner, greater capital, and an incredibly talented team, we are very optimistic that this is just the early stage of a tremendous success story.