Deal Mechanic: Intelligrated's package deal

London-based private equity firm Permira had been searching for deals in industrial technology – which combines two of its five major focus sectors – when it came across Chris Cole and Jim McCarthy, founders of Ohio-based Intelligrated, a business combining software and technology to sort and distribute packages for retailers and manufacturers.

“Our thesis was that higher penetration of home delivery and online ordering put the company in a good spot, because there was a lot of change going on with retailers orientating away from brick-and-mortar stores to home delivery,” says Richard Carey, Permira partner and co-head of the firm’s industrials sector team.

Permira stood out to Intelligrated’s founders because it understood software, Carey says, unlike many of its competitors who focus on industrials and are far-removed from the technology side. Cole and McCarthy had a minority equity stake in the company and were searching for suitable partners who understood the importance of continued investment in software.

Permira bought a majority stake in Intelligrated from then-owner Gryphon Investors for $500 million in 2012 through its fourth fund, Permira IV, which closed in 2006 on €9.6 billion. Owners Cole and McCarthy retained their interest in the company and continued their leadership positions after the transaction. The transaction put Intelligrated at an enterprise value of $515 million, an 8.2x multiple of the trailing 12-month EBITDA.

Permira and Intelligrated’s management team collaborated to map out how they could begin calculating the profit-and-loss for its software products, providing insight for repeatable product development and improvement.

“That enabled recurring revenue, software updates and customer intimacy. About $50 million of revenue today [of the $940 million projected total revenue for 2016] comes from software – whereas that number was zero when we first invested.”

In order to fuel software development, Permira brought in Greg Clark, CEO of Blue Coat, a cybersecurity company that had been purchased by Symantec, to the Intelligrated board of advisors in 2013. As a board member of other software companies, Clark provided insights on the industry and how to grow a software business. The company also boosted its software suite through acquisition; in 2013 it took on Denver-based Datria, whose software allows workers to connect and communicate with their computer systems using their voice.

Another key component to staying competitive in the global market was the acceleration of Intelligrated’s aftermarket service business, which provides customer service, such as repairs and software upgrades, once a product has been purchased.

“This was a company where the customer service was phenomenal,” Carey says. “The market was moving much more proactively, so we knew we needed to have a real aftermarket, proactive programme to service the customers.”

Permira brought on board John Sorrenson from Honeywell to help lay the foundation and run this business, which Carey says has doubled under Permira’s ownership and grows at almost 30 percent annually.

During its four-year ownership of Intelligrated, Permira helped the company develop new automation systems and a new parcel product. The company now has a pipeline of products in development which it anticipates will bring in $4 billion in additional revenue. Of this, $1.4 billion is accounted for by new products, capabilities and customers the company didn’t have at the time of Permira’s acquisition.

“More than a third of the pipeline Intelligrated has today comes from new products and capabilities,” Carey says.

Intelligrated more than tripled its research and development investment, having gone from $7 million at the time of acquisition to $27 million this year. This increase led to the development of an automated storage and retrieval system, a full parcel solution and robotic solutions.

Automation contributes to increased accuracy in package deliveries – a process that used to be filled with errors, including distributions of crate-loads of products to stores, regardless of incorrect amount or location.

“We were investing behind the demands the existing systems could not meet,” Carey says. “As long as you put in the dollars, there was an opportunity to be on the front foot, investing in automation. It’s all the automation that decides how those parcels are sorted and distributed.”

When Permira bought Intelligrated from Gryphon, the software firm had 20 key customers with which it had established meaningful relationships. To Carey, new products and signing new customers went hand-in-hand, since, without a new parcel product, Intelligrated wouldn’t have gained new parcel customers.

“We spent quite a lot of time on sales, organisation, territory design and account management,” Carey says. “There were a lot of big logos to go after, like Walgreens, UPS, Nordstrom, Fresh Direct and Amazon. There were many in the regional level as well.”

Between 2012 and 2016, Intelligrated’s sales pipeline quadrupled.


Leveraging its international network, Permira planted Ohio-based Intelligrated’s flag in two promising markets abroad.

“We wanted to follow the big customers who were going to Brazil and China,” Carey says. “We grew Intelligrated’s market presence there from nothing to a business with a pipeline of potential sales opportunities – which were being discussed or looked at but not yet finalised – worth over $200 million.”

He says Permira understood the macroeconomic slowdown in those places, but there was no such slump in e-commerce growth. And, thanks to Intelligrated’s relationships with Amazon and Walmart, among other big names, its expansion came with immediate reputation and recognition.


Permira, which has sold industrial businesses to strategic buyers in the past, ran a very narrow, strategic-only auction process, already knowing of four or five potential buyers for Intelligrated.

“It became clear that there were a couple of strategic buyers with a real ambition to put much more money into this sector, and could use Intelligrated as a base to do that,” Carey says. “Clearly, Honeywell had the resources to support significant investment in international growth.”

Permira announced on 1 July its plans to hand Intelligrated over to Honeywell in an all-cash transaction valued at $1.5 billion, which is expected to close before the fourth quarter. Over its four years of ownership, Permira stayed squarely focused on the five major initiatives it prioritised for Intelligrated. The amalgamation of two focus sectors through one portfolio company is something Permira would do again.

“We’re looking at a smaller business right now that has many of the similar features,” Carey says.