Convoy Inc. will be “closing down its core business operations,” the company’s employees were starkly told Thursday, roughly one day after its fate was suddenly and publicly thrown into doubt.
In the letter from the Seattle-based digital brokerage’s CEO and co-founder Dan Lewis that followed a companywide phone call, there was no suggestion that Convoy was about to see its digital brokerage operations snatched up by another suitor, as the rumor mill had churned out several names Wednesday. The company will retain a small team that will not only wind down existing operations but “handle … future strategic options.” Beyond that, every other employee was let go.
“We spent over 4 months exhausting all viable strategic options for the business,” Lewis wrote. “However, none of the options ultimately materialized into anything sufficient to keep the company going in its then current form.”
Later in the letter, Lewis added: “Following an exhaustive process, spanning many, many months during which we explored all viable strategic options for the business, the result is where we are today. Convoy is closing the doors on its current core business operations and exploring and evaluating strategic options for what might come next.”
The ultimate blame for the collapse, according to Lewis, is that Convoy found itself in “the middle of a massive freight recession and a contraction in the capital markets. This combination ultimately crushed our progress at the same time that it was crushing our logical strategic acquirer — it was the perfect storm.”
But it wasn’t just the “logical strategic acquirer,” according to Lewis. There has been a drop in merger and acquisition activity in the logistics sector and “most of the logical strategic acquirers of Convoy are also suffering from the freight market collapse, making the deal doing that much harder.”
The identity of the “logical strategic acquirer” was not revealed. But multiple reports did say C.H. Robinson (NASDAQ: CHRW) was in advanced talks about an acquisition of Convoy. C.H. Robinson’s prior CEO, Bob Biesterfeld, was ousted at the start of the year reportedly because of a lagging performance of its technology to compete with digital brokerages like Convoy. C.H. Robinson certainly has undergone “crushing” times: Its stock is down about 10.5% in the last year and about 15% in the last three months. It was trading midday Thursday at about $83, well down from a 52-week high from early February of $108.05.
C.H. Robinson declined comment on any acquisition discussions with Convoy.
Lewis’ letter pulled no punches. “We moved all business levers possible,” he wrote. “But we were running up the down escalator … and it kept speeding up. So despite your excellent work on our product and service innovation, extensive revenue driving efforts, and the painful and sweeping cost cuts you have had to endure, it was still not enough to get us into the financial position necessary to withstand the increasing pressures of the industry, without the need for outside funding.”
Lewis’ letter praised the company’s workforce several times. This passage was typical: “The work you’ve all done will leave its mark on the freight industry forever. This industry needs to modernize. Shippers want it, carriers want it, and the market wants it. We still believe that this will be the future for this industry.”
He closed the missive by telling his staff, “I think the world of you. You guys rock.”
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