In the timely effort to scale grocery vertical, Palo Alto-based company Huntsman Gay Global Capital (HGGC) announced in October of last year that it had signed an agreement to merge the firm’s own portfolio company MyWebGrocer with Miami-based Mi9 Retail, a provider of omni-channel retail solutions.
HGGC is a leading middle-market private equity firm with $4.3 billion in cumulative capital commitments. MyWebGrocer provides software and digital media solutions to the grocery and consumer packaged goods industries.
The term grocery vertical designates a type of market in which vendors offer goods and services specific to an industry, trade, profession, or other group of customers with specialized needs. Other examples of vertical groups include legal, education, and financial markets.
Mi9’s current owners are General Atlantic and Respida Capital. Sources say the combined resources of the companies will power retail operations for more than 500 retailers and consumer brands around the world including Abercrombie & Fitch, BevMo!, Cole Haan, Giant Eagle, Levi’s, Nike, Shopko, ShopRite and Tommy Bahama.
Rich Lawson, HGGC CEO and co-founder said the new merged company is set to revolutionize the retail industry and combat what some have called “the Amazon effect,” an industry-specific term for the changing landscape of retail blamed on Amazon’s innovations in web services. Amazon reportedly spent $22.6 billion on technology innovation in 2017, more than any other U.S. company.
The company’s aggressive research and development left many brands struggling to compete, and sometimes those efforts came too late. One example includes a USA Today report in October 2018 that 142 Sears and Kmart locations were closing in Chapter 11 bankruptcy. While no one is saying that Amazon caused any one retailer’s financial woes directly, marketing experts say that Amazon’s web services and ability to scale, almost instantly, for national and global brands is certainly a game changer.
Sources say most companies are either going to compete, collaborate, or copy Amazon’s effectiveness at reaching consumers. Companies that are going to successfully compete need to be ready to do what it takes to offer what consumers expect from their favorite iconic, outstanding brands.
Neil Moses, CEO of Mi9 Retail said consumers expect all retailers to offer a unified experience across their online and in-store channels, including social media, and retailers need to invest in omni-channel technology to keep up. Mi9 helps retailers manage their merchandise and take and process orders, while providing vital marketing data analytics and point-of-sale technology.
The addition of MyWebGrocer enhances the Mi9 software suite, giving the company entrance into the grocery vertical and positioning Mi9 even more aggressively with general merchandise retailers who also sell grocery. The MyWebGrocer solution bolsters the existing Mi9 offering with new e-commerce, order management and click-and-collect functionality. Additionally, MyWebGrocer customers are expected to benefit from the broader Mi9 suite of demand management, price and promotions management, and retail analytics solutions.
The combined Mi9 and MyWebGrocer business will be a leading software provider to retailers with $250 million to several billion in revenue, a market segment estimated at $1 billion that is growing more than 5 percent annually.
HGGC offers these retailers a wealth of experience. HGGC is a leading middle-market private equity firm with $4.3 billion in cumulative capital commitments. HGGC is distinguished by its “Advantaged Investing” approach that enables the firm to source and acquire scalable businesses at attractive multiples through partnerships with management teams, founders and sponsors who reinvest alongside HGGC, creating a strong alignment of interests. Over its history, HGGC has completed more than 100 platform investments, add-on acquisitions, recapitalizations and liquidity events with an aggregate transaction value of more than $17 billion.
The Silicon Valley firm is led by Rich Lawson, CEO, and Steve Young, managing director and former quarterback for the San Francisco 49ers. The firm was co-founded by Rich Lawson, Bob Gay and Greg Benson and many of the company’s first employees are still with the firm.
HGGC invests across a range of industry sectors, including tech and tech-enabled services, business services, and financial services. HGGC’s investing focus is typically on middle-market companies that have $100 million to $1 billion in annual revenues.
HGGC’s MyWebGrocer already had a client list of all-star brands. MWG manages digital solutions for more than 140 retailers nationally, representing more than 10,000 stores and 200 major consumer packaged goods brands, including well-known brands like McCormick, Kellogg’s, Unilever, and Nestle.
In addition to the Mi9/MyWebGrocer merger, other HGGC company milestones include investment transactions such as AutoAlert, which provides cloud-based data and analytics services to the automotive market; Pearl Holding Group, an insurance-services company; Serena Software, an information technology business; Survey Sampling International, which provides data and technology services for consumer and business-to-business research; Citadel Plastics Holdings; Hollander Sleep Products; hybris, an e-commerce business; and Sunquest Information Systems.
In October of 2018, HGGC announced that the company signed the definitive agreement to lead the merger of Mi9 Retail, and as previously mentioned, the move was partially in response to Amazon, which had launched into the grocery space with the acquisition of Whole Foods Market. Amazon already controls about 40 percent of the U.S. e-commerce market and is on track to own more than 50 percent of the market by 2021, according to Bain & Company’s Global Private Equity Report 2018.
“We are always thinking about how we can help companies that are going to get dislocated and disintermediated by Amazon,” said Richard Lawson, CEO of HGGC. “End markets everywhere are being changed by Amazon. As Amazon scales they will challenge all kinds of industries and it will have a cascading effect across all sectors. You are already seeing more companies trying to connect their brands with consumers in new ways.”
The new newly-merged company Mi9 will provide a suite of state-of-the-art web-based tools that will allow grocery stores to offer their customers a consistent internet presence and help position them for success in a rapidly changing market.
HGGC was named 2014 M&A Mid-Market Private Equity Firm of the Year by Mergers & Acquisitions magazine.
Terms of the Mi9/MyWebGrocer merger were not disclosed.
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Dil Bole Oberoi
