Pallet management service provider 48forty Solutions has leveraged its private equity backing to acquire another company in its sector as demand fluctuations triggered by the pandemic economic recovery have led to broad shortages of pallets.
Terms of the deal to buy Houston-based Relogistics Services were not disclosed.
However, the deal is the first purchase by Alpharetta, Georgia-based 48forty since it was taken over by Audax Private Equity at the end of 2020, the firms said.
The combination will bring together 48forty’s position as a national provider of recycled whitewood pallets with Relogistics’ role as a provider of pallet and container management services with more than 60 locations across the U.S.
In addition to aligning their business interests, the acquisition also marks a reunion of executives at the two firms. According to 48forty, the two companies’ management teams will now reunite after having worked together under a shared parent company, IFCO, prior to 2012. Concurrent with the transaction, Mike Hachtman, Relogistics’ current CEO, will transition to CEO of the newly combined business, while Norm Plotkin, 48forty’s current CEO, will remain involved as chairman of the board.
“I am very excited to combine the retailer and service-focused solutions from Relogistics with the robust pallet recycling capabilities of 48forty. This partnership will allow Relogistics to offer additional service options to our existing customers and other retailers across the country,” Hachtman said in a release.
The timing of the deal comes as logistics companies grapple with a pallet shortage, according to Tom Moore, managing partner at Transportation / Warehouse Optimization (T/WO), a Franklin, Tennessee-based provider of supply chain solutions and consulting services.
Moore’s analysis was about the market in general, not the 48forty deal in particular, but it could indicate that the merger will quickly pay off by filling an acute shortage. In a blog post about the pallet sector, Moore blamed the growing shortage on the “bullwhip effect,” a market condition where modest fluctuations at the retail or user level are magnified into large swings of inventory at the wholesale and manufacturing levels.
“With lumber prices sky high, expect pallet pools (Chep, Peco, etc.) to scour the world for empties, raise prices, convert some parts to plastic, or all of the above,” Moore said. "In any event, be prepared to pay a big premium for new pallets. This brings up a significant problem – case-pick operations often use more pallets than needed because pickers encounter bins that have not been replenished or the bin has insufficient stock forcing a return trip – generally by a different picker with a different piece of wood!”
