Exclusive: Hudson Hill Capital closes CV for InXpress

Hudson Hill Capital has closed a single-asset continuation vehicle for InXpress, an international and domestic parcel and freight services provider based in Sandy, Utah, PE Hub has learnt.

Barings Capital Management and Ardlussa Capital are the anchor investor group in the CV, with the participation of Hudson Hill and InXpress company management, which both rolled the entirety of their proceeds into the transaction.

Hudson Hill acquired a controlling stake in InXpress in 2020 and made a more than 3x return before the CV.

In an exclusive interview with PE Hub, Hudson Hill’s founder and managing partner Eric Rosen said every existing investor had a real choice – liquidity now at a price set by a competitive process, or continued participation.

“Some of the investors wanted a strong outcome in a shorter period, and we were able to give them that – a return of more than 3x,” he said. “Others, including Barings, wanted to continue with the company. We hired Evercore to run the process, which was broad and competitive, and brought Ardlussa into the transaction.”

Founded in 1999 in the UK, InXpress connects small and mid-sized businesses to parcel and freight carriers through a franchise network that spans 14 countries, 450 franchises and more than 46,000 customers, reselling capacity from DHL, UPS, FedEx and over 100 freight carriers on its proprietary WebShip platform, according to Rosen.

Pandemic effect

Pent-up consumer demand during the covid-19 pandemic boosted InXpress’ business, Rosen said.

“It pulled an enormous number of small and mid-sized businesses into e-commerce almost overnight, which meant they suddenly had to ship – and transportation and logistics is not typically their core focus,” he said. “Meanwhile, carrier capacity tightened, and the environment grew more volatile amid pricing fluctuations, making access and expertise genuinely valuable. That is precisely the problem InXpress was built to solve.”

While covid-19 was a tailwind for the whole sector, InXpress’ strongest year came well after the pandemic, the Hudson Hill founder said. This was driven in part by change of management, bringing all 14 participating countries on a single technology platform, and a proprietary freight product that did not exist before, among other factors.

InXpress also grew and expanded geography through its franchise model, which also had a “compounding” effect. “Every new franchisee we bring into the system adds selling capacity, which lets us penetrate new geographies or existing ones more deeply, which in turn attracts more franchisees,” Rosen said.

The company also grew by partnering with big logistics companies.

“DHL has been foundational to our growth, but we have also added important new relationships with UPS and FedEx, as well as more than 100 carriers across the geographies in which we operate,” Rosen said. “InXpress now has the broadest carrier relationships in the 3PL industry, which means a franchisee can solve a far wider range of shipping problems for a customer than they could have five years ago.”

Barely scratched

Looking forward, Rosen said InXpress has an “enormous” opportunity for growth, underpinned by the strong economic performance.

“Our customers represent a cross-section of the general economy. As long as the economy is growing, we will participate in that growth,” he said. “And during a downturn, 3PL penetration actually tends to increase, because customers look harder for cost-effective shipping. Economic activity can decline, and the underlying demand for what we do still rises – which has driven growth at InXpress in 27 of the 28 years of operation.”

InXpress serves small and medium-sized companies, and there are tens of thousands of those companies in the US and across the world. “We have around 46,000 customers today, which is a very small percentage of the total addressable market, which is enormous. We have barely scratched the surface.”

Founder-owned targets

Before founding Hudson Hill, Rosen was a partner at MSD Capital, the private investment firm established to exclusively manage the capital of Michael Dell and his family. Before that, he was a partner and managing director at Onex Corporation.

Rosen said his Hudson Hill firm is interested in working with founders looking to spur their businesses from lower mid-market to the mid-market class.

“We work with founders and families who have built something durable but need to professionalize several parts of their business at once. In most cases, these founders are looking for a partner rather than an exit – someone who can help the company transition from the lower mid-market to the mid-market,” he said.