November 17, 2008
William Hoffman
Associate Editor

Private equity investors are still enthusiastic about supply chain and logistics companies, despite the financial crisis and what looks to be a lengthy recession.

But those investors face stiff headwinds finding suitable companies to buy and finding financing for those acquisitions.

"The current markets are extremely difficult for companies in the $50 million to $100 million value range," said Todd Solow, partners at Norwest Equity Partners. "It's very challenging, and financing, if you can get it, is very expensive, and the terms are onerous compared with even six months ago."

"I don't see that changing," Solow said, adding that the economic outlook for 2009 isn't any better than for the rest of 2008.

But that hasn't stopped venture capital firm Austin Ventures from pledging up to $75 million to create Avron Partners, a new strategic acquisitions and business development company.

Ronald T. Sorrow, the former CEO of RoadLink USA and CSX Intermodal, is CEO of Avron. The new company will be built to last, not just to be sold, Sorrow said.

Avron is already in discussions with a half-dozen or so companies it might acquire, Sorrow said, though he declined to mention names. "We've cast a fairly broad net and haven't limited our thinking to one particular type of acquisition," he said. The company will also consider "partial acquisitions" and loaning capital to companies to fund their expansion.

Avron can do this during the middle of the worst credit crisis in a half-century because its backers don't have to rely on debt to get things done, said Lee A. Clair, partner at transportation consultancy Norbridge. "I view private equity as a very good opportunity, a very good option," Clair said.

Private equity groups have been aggressively making deals in small- to mid-sized transportation and logistics companies for the last few years. Fenway Partners invested in RoadLink, Sorrow's old company, in 2006, as well as Refrigerated Holdings, Fastfrate, Panther Expedited and Preferred Freezer Services, all since the middle of the decade. New Mountain Capital injected equity into Intermarine and Inmar just in the last couple of years.

Lately some private equity investors have set their sights on bigger fish. Welsh, Carson, Anderson & Stowe in 2005 took an ownership position in OHL, formerly Ozburn-Hessey Logistics, while perhaps the best-known private equity play was Apollo Management's 2006 purchase of Netherlands-based TNT Logistics, now called CEVA Logistics.

Private equity typically purchases companies with the goal of selling them at a profit after five to seven years, but Sorrow said Avron's Austin Venture backers have indicated they want to make the new company a going concern. "We're prepared to take a pretty patient approach," Sorrow said.

Patience may be the key, Solow said, because in the current financial and economic climate, investors need to be willing to wait for the right deals to become available.

Owners of, or investors in, poorly performing logistics and transportation businesses may feel pressured to sell in the current weak business climate. With debt expensive when it's available at all, sellers will have to come off what were until recently high multiples over earnings to attract buyers.

The highly fragmented transportation and logistics sector may be particularly well suited for private equity investment, Clair said. Buyouts and roll-ups of $30 million companies that can be quickly consolidated, especially LTL carriers, to facilitate growth are a specialty of many private equity firms.

"It's synergies of size, not economies of scale," said Clair. "It's much harder to get economies of scale in truckload."

However, the logistics industry is also strewn with companies that tried to go boldly into what appeared to be promising markets. Greatwide Logistics and Global Logistics Acquisitions Corp. - the former now in Chapter 11 bankruptcy protection, the latter erected on a buy-and-build strategy similar to Avron - are among those that foundered in depressed sales environments.

Avron will be different, Sorrow said. The company need not rely on debt markets to finance its acquisitions, he said, it won't buy turnaround projects or distressed businesses, and it will rely on proven executives such as Sorrow.

"There is a need for patient and disciplined investors," Solow said. "With all the turmoil in financial markets, there is little premium for being an aggressive investor."

1/17/08 Traffic World (Pg. Unavail. Online)
2008 WLNR 21840653
Traffic World
Copyright 2008 Commonwealth Business Media

---- INDEX REFERENCES ----
COMPANY: NORWEST EQUITY PARTNERS IV LP; NORWEST VENTURE CAPITAL MANAGEMENT INC; OZBURN HESSEY LOGISTICS; CSX CORP; OZBURN HESSEY LOGISTICS LLC; FENWAY PARTNERS

NEWS SUBJECT: (Venture Capital (1VE73); Financially Distressed Companies (1FI85); Corporate Financial Data (1XO59); Corporate Funding (1XO17); Funding Instruments (1FU41))

INDUSTRY: (Financial Services (1FI37))

---

AUSTIN, Texas, October 27, 2008 - Austin Ventures ("AV"), one of the nation's leading venture and growth capital firms, announces the commitment of up to $75 million of   equity capital for the creation of AVRON Partners, Inc., a new supply chain services acquisition and strategic business development company.  The new organization has been formed in partnership with Ronald T. Sorrow, co-founder and former CEO of RoadLink USA and former CEO of CSX Intermodal.  Mr. Sorrow will lead the new organization as its President and Chief Executive Officer.  The new venture will concentrate on acquiring and strategically expanding companies within the supply chain services, transportation logistics, and distribution sectors.

"Ron is an outstanding executive who has demonstrated success in both large, corporate environments, and entrepreneurial ventures in the supply chain and logistics industry.  We are excited to bring Ron's experience and perspectives to our initiatives in this space," said David Lack, AV Partner.  

Mr. Sorrow has over 30 years of senior leadership experience in air express/air cargo transport, nationwide specialty and general commodity motor carrier operations, railroad intermodal services, and ocean cargo inland logistics.  He has worked throughout North America, Asia, Europe, and Australia/New Zealand markets during his career.

Most recently, Mr. Sorrow was a co-founder and Chief Executive Officer of RoadLink USA, the nation's largest provider of intermodal motor carrier and related logistics services with revenues in excess of $230 million.  He led RoadLink USA from its creation in 2000 to its successful sale late in 2006.  Under Mr. Sorrow's leadership, eleven leading, regional, intermodal transport and logistics companies were acquired and integrated into the nation's first and largest network of its kind.  Mr. Sorrow designed and implemented the company's strategic redesign, diversified and broadened the scope of the company's services, and significantly improved revenue and profit results for the enterprise.  Following the sale of RoadLink, Mr. Sorrow served as a Director on the Board and Vice Chairman of the company.

Prior to RoadLink, Mr. Sorrow served as the President and Chief Executive Officer of CSX Intermodal, Inc., the $1 billion intermodal rail, truck logistics and ocean cargo inland transport subsidiary of CSX Corporation (NYSE: CSX).  Mr. Sorrow was recruited to CSX in 1988 to help lead the creation of and manage the nation's first nationwide, integrated intermodal rail-truck-ocean inland distribution network.  During his early years at CSXI, he was the senior officer responsible for all marketing, sales, and strategy development as CSXI became the fastest growing and highest margin investment returns generator within the CSX portfolio of transportation companies.  He was appointed CEO of CSXI in 1996 and served in that capacity through 1998.

"The partnership with Austin Ventures is a very unique opportunity," said Mr. Sorrow.  "AV has made a significant investment commitment to AVRON Partners.  They also bring a deep understanding and successful track record of building a company's long term operating success while simultaneously generating superior returns for the company's investors and shareholders."

Said AV General Partner Phil Siegel, "As with past CEO-in-Residence partners, our team will pursue opportunities to invest in successful business models where owners see the potential to accelerate their personal and enterprise's growth opportunities by blending their knowledge and strengths with those of Ron and Austin Ventures.  This has proven to be a winning combination in our previous executive relationships, and we look forward to working with founders who will be motivated by the opportunity to partner with Ron."

AV's relationship with Mr. Sorrow is part of a stated strategy to partner with talented executives with proven track records to build growth companies in attractive markets.  AV has a dedicated in-house talent function that identifies executives that want a hands-on partner in building their next business.  AVRON Partners will join AV's portfolio of leading supply chain and logistics investments, which includes Newgistics, ReTrans and Port Logistics Group.

About Austin Ventures
Austin Ventures (“AV”) has worked with talented entrepreneurs to build valuable companies for over twenty-five years. With $3.9 billion under management, AV is the most active venture capital and growth equity firm in Texas and one of the most established in the nation. With an investment focus on Internet and information services, software, new media, business services and supply chain, and financial services, AV invests at all stages of company development, from $100,000 in “planned experiments” in early-stage ideas to $100+ million investments in expansion rounds, minority recapitalizations, and buyouts of lower middle market growth companies. AV’s strategy is to partner with talented executives and entrepreneurs through its CEO-in-Residence and Entrepreneur-in-Residence programs. Visit [ www.austinventures.com ] for more information.

For more information contact:
Kim Hughes
Austin Ventures
khughes@austinventures.com
512.657.7222