On 2 November 2021, American Eagle Outfitters agreed to acquire Quiet Logistics for $350 million
Non-Tech – American Eagle Outfitters: American Eagle Outfitters Inc is a 35,000 employee apparel and accessory retailer with stores throughout North America, China, Hong Kong, and the United Kingdom. The company leases all its stores, the majority of which are in the United States. American Eagle also has an online business that ships worldwide. The company's primary brand, American Eagle Outfitters, sells casual apparel and accessories that target teenagers and young adults. Its Aerie brand sells intimates and personal-care products for women. Women's items comprise most of the company's sales. American Eagle designs its own merchandise and sources its production from third-party manufacturers that are mostly located outside of North America.
Tech – Quiet Logistics: Provider of third-party logistics services to e-commerce companies. The company's services include delivering products to customers' doorstep, warehousing and packaging of products which are done using modern robotic technology automated by proprietary software and complemented by a nuanced human touch, enabling online retailers to safely store a wide range of products, package them when ordered and get them quickly delivered to the buyers.
On 2 November 2021, American Eagle Outfitters (NYS: AEO) agreed to acquire Quiet Logistics in a $350 million all-cash transaction, a deal that demonstrates the seismic shift taking place in the supply chain sector today.
The Quiet Logistics techquisition is expected to support American Eagle Outfitters' continued growth while also driving economies of scale as it expands its customer base to other brands and retailers seeking advanced logistics capabilities.
The techquisition further demonstrates American Eagle’s control over its supply chain — a priority American Eagle executives have put forth to investors and analysts.
"Supply chain transformation has been a huge focus for us. We're very focused on controlling everything that we can and there's a lot that's within our control."
- Michael Rempell, Chief Operating Officer, American Eagle
Through this techquisition, the US-based retailer can now tap into Quiet Logistics' automation expertise to meet consumer expectations around free and fast shipping during the holidays.
The deal rationale revolves around American Eagle’s goal to enable quick fulfilment and delivery for its customers, reducing the number of SKUs and opening multiple distribution centres. Under American Eagle Outfitters, Quiet will continue to operate independently.
The techquisition follows American Eagle's purchase of e-commerce delivery startup AirTerra. As seen from the previous acquisition of 3PL AirTerra, developing the supply chain has lowered costs and generated efficiencies for American Eagle.
American Eagle plans to make similar logistics-related acquisitions in the not-so-distant future to fend off possible disruptions to its supply chain.
"About the acquisitions, yes…we are working on something. I can't go into details. But there'll be announcement probably next couple of months."
- Jay Schottenstein, executive chairman and CEO at American Eagle
Like most other techquisition deals, the market reacted favourably to the American Eagle’s announcement given the positive outlook associated with the strategic potential of the techquisition and how it fits with Quiet Logistics supply chain offering.
American Eagle’s share price increased by approximately 7% from 2 November to 9 November 2021, compared to an increase of approximately 1.2% in the S&P 500 during the same period - implying an addition of a net ca $250 million to American Eagle’s market capitalisation.
The net increase in American Eagle’s market value represented approximately 0.86x the purchase consideration of Quiet Logistics, indicating a promise of the deal paying for itself in the short-term.
Post COVID-19, the size of the global supply chain management market worldwide is estimated to grow from $16 billion in 2020 to $31 billion by 2026, a CAGR of 12%.
The strong growth can be attributed to the rapid demand for supply chain management software and services, along with the supply chain disruptions triggered by the COVID-19 pandemic.
Additionally, there is a substantial demand for online shopping in several areas, which requires food & beverage, manufacturing, and logistics companies to increase their investments in automation, including the automation of supply chains.
The pandemic severely impacted the retail sector, and experts foresee that maintaining the complex supply chain networks would be difficult for them, which is expected to drive the demand for SCM software.
According to a survey conducted by "Institute for Supply Chain Management Organisation" in March 2020, almost 75% of the businesses reported global supply chain management disruptions in one form or other due to the corona virus-related transportation restrictions, and it is further expected to increase in the upcoming few weeks.
With a robust supply chain, retailers are better placed to withstand disruptions and can continue to operate efficiently with minimal costs. American Eagle understands the critical importance of supply chain management and actively takes countermeasures to address these challenges.
Like American Eagle, several retailers made plans to ensure goods reach consumers in time for the holiday season. To illustrate, Costco and Home Depot have rented entire container ships to prevent delays and control costs.
Furthermore, Home Depot recently became the first retailer to announce it was using Walmart's new delivery business, GoLocal, to deliver products to consumers' homes.
American Eagle’s decision to acquire another logistics firm will help ensure the business will meet its fulfilment orders. Mr Jay Schottenstein, American Eagle Outfitters’ executive chairman and CEO, believes this move is an essential pillar of the brand's strategy to transform its supply chain and create an on-demand, hyper scaled operations platform.
Quiet Logistics plans to support American Eagle’s continued growth while also driving economies of scale as it expands its customer base to other brands and retailers seeking advanced logistics capabilities.
“A reliable and consistent in-market fulfilment network is vital in today’s marketplace. The Quiet Logistics team shares our vision for an asset-light, technology-led supply chain network and brings strong expertise. This transaction will formalize our successful partnership, provide control and flexibility within our operations and accelerate the growth of Quiet Logistics.”
- Michael Rempell, AEO’s Chief Operations Officer.
American Eagle’s techquisition of Quiet Logistics is a great example of how a traditional retailer/manufacturer is actively engaging in the journey of transforming itself to deliver greater value to its stakeholders – particularly its shareholders and customers – by properly positioning itself for the future, ready to tackle any supply chain disruptions, especially in a pandemic.
The essence of such a transformation unfolding is embedded in a strategy execution approach we have trademarked and call Techquisition, which my firm, Aquaa Partners, has designed and delivers to its clients every day as an experienced and trusted expert partner.