11 March 2024 (Lloyd's List) - A RACE to scale data and secure increasingly discerning investment capital has made further consolidation across shipping’s digital technology sector inevitable, according to ZeroNorth chief executive Søren Meyer.
“If you don’t have the scale, you don’t have the data and then it’s difficult to compete,” said Meyer following the completion of ZeroNorth’s merger with Alpha Ori Technologies last month.
Meyer believes that a tipping point has been reached where the previously fragmented multitude of digital start-ups’ ability to continue attracting investment is waning.
Increasing cost of capital is partly responsible as investors review the persistently fragmented market of digital start-ups, which have sucked up development funding, but have failed to grow beyond a handful of customers.
“The space was getting crowded with lots of small companies, but now you are starting to see some scale at the top, things are changing,” said Meyer.
“Some of those small players, they had like three or four customers and that’s very risky for everyone involved. Those customers, they are now being approached by companies like ours who are showing them why bigger is better from a data point of view”.
Having received all final regulatory approvals, Meyer sealed the Alpha Ori combination last month, marking the fifth major takeover deal since the company’s inception in 2020.
But Meyer says there are more acquisitions for ZeroNorth on the horizon already.
“It’s not like there’s another big deal I’m about to announce tomorrow, but we will keep on using the ZeroNorth platform for consolidation,” he confirmed.
Meyer, however stresses the need to combine acquisitions with the organic growth that ZeroNorth has maintained throughout its recent deals that include the marine fuel supply software company BTS, Prosmar Bunkering and bunkering optimisation outfit ClearLynx.
Around 60% of ZeroNorth’s business has grown organically compared to just 40% through acquisitions.
“If you can’t document that organic growth you don’t get the same access to risk capital and you don’t get to make the deals. But yes, I can confirm that we will still be looking at what opportunities are out there in the market for consolidation.”
Meyer’s prediction that consolidation is accelerating is supported by the recent flurry of deals.
According to maritime technology consultants Thetius, maritime tech M&A transactions grew by 57% between 2021/22 and 2022/23, while the value of those transactions grew by 77%, from $9.6bn to $17bn over the same period.
“The opening weeks of 2024 certainly haven't slowed down the consolidation we saw in 2023,” said Thetius founder Nick Chubb.
“In just the last few weeks we have seen Yara sell off its marine technologies business, K Line purchase kite maker Airseas, ABB scoop up weather routing data supplier DTN, Grieg buy emission lifecycle assessment firm ReFlow and of course ZeroNorth continue their rapid rate of acquisitions by taking over Euronav’s FAST platform.”
The FAST platform deal at the end of January, that saw Euronav hand over its Fleet Automatic Statistics and Tracking platform, which collects high-frequency data in real time from sensors across Euronav’s fleet, was a prime example of how scale is now necessary, argues Meyer.
Euronav’s in-house development had achieved impressive results over three years, but even with the resources and scale of one of the world’s largest operators, it was not enough.
“They realised it was quite expensive to keep on building on their own versus leaning into an industry platform like ours,” said Meyer.
“It’s similar to what we did with Alpha Ori — we take the best of what people have built and we put it into one. And the result of that is that everybody gets access to this at a much cheaper cost than if you were to do it in-house.”
