Sorted, the once-feted Manchester-based deliverytech platform, has agreed to be bought for just £66.73 in a reverse takeover by AIM-listed Location Sciences. The move, assuming it is agreed by Location Sciences’ shareholders, will see them renamed as Sorted Group Holdings plc.
Dealroom had once valued Sorted at up to $240 million, and the company had several high-value funding rounds. So, how did Sorted move from being the poster child of deliverytech to the equivalent of being in the sales bin in the Post Office queue?
From the star of deliverytech services to a loss-making target for Location Sciences
Founded as My Parcel Delivery in 2010 by David Grimes and Paul Haydock, the company was inspired by the frustration Grimes felt when sending parcels. Realising that there would be plenty of SMEs that shared those frustrations, they aimed to make the process as easy as possible.
Rebranding as Sorted in 2017, the company was already meeting with significant success when Covid-19 transformed its business. The boom in e-commerce, and the need for robust delivery to support it, was made for Sorted. In January 2021, the company was named by the Financial Times as one of the UK’s fastest-growing. And by the end of that year they had raised a further $50 million in investment, and were working with household names like Asda, ASOS, and M&S. And, to further underline its success, it ended the year acquiring returns service Clicksit.
But while Covid-19 was a boon for e-commerce and associated tech, the world emerged from the pandemic under more headwinds: the pandemic changed habits, but it has no monopoly on economic impact. With restrictions lifted, some people returned to in-person shopping, but many others have curtailed their spending because of the cost-of-life crisis. Meanwhile, the impact of events like Brexit and the Russian invasion of Ukraine have made like difficult for many businesses. Inevitably, that would have been felt by Sorted, as their Covid-driven growth slowed.
It is, perhaps, the consequence of unrealistic expectations that fell Sorted. They had, actually, continued to see post-Covid growth, as recently as Christmas 2023 they could report a 30% increase in shipping volumes. However, they were falling short of their own growth forecasts.
And, to make matters worse, Sorted looked like they were some way from profitability. It had never made a profit, filing losses of £7 million and £12 million in 2020 and 2021. Their, as yet, unfiled 2022 accounts reportedly saw that trend continuing.
At a turbulent time for the tech sector, with investors increasingly looking for returns on their money, it was not a good position for Sorted — or any company — to be in.
In 2020, Sorted appointed Carmen Carey as a non-executive director. A respected leader with several successful exits behind her, she replaced Grimes as CEO a year later. Unfortunately for Sorted, the changes were not enough and, in June 2023, it was announced that negotiations were underway for an acquisition by Location Sciences.
A route to delivering profitability
The announcement of a reverse takeover marks the end of that process, and sees Sorted transformed. Although Carmen Carey will remain as CEO, the rest of the board has left. The move reflects a confidence that her work is essential to moving Sorted to profitability.
The announcement also included details of further funding for Sorted, including £2 million in equity and a £3 million credit facility. Much of this will be taken up immediately, as the new owners assume liability for several million in debt held by Sorted.
While that debt means that the £66.73 purchase price is not quite the bargain bin price it first appears, those who had invested more than £70 million in Sorted until 2021 will lose their money. And that means that the new Sorted Group Holdings plc has a far more viable path to profitability.
Location Sciences is clearly confident of the potential. The announcement marks the end of a more than six-month-long process. While Sorted might not have made a profit, it still has significant assets. The most obvious will be Sorted’s IP and clients. The SaaS is used by some of the country’s most prolific e-commerce names, and Location Sciences will have considered client retention as part of their due diligence.
They will also have considered the people. Location Sciences hopes to retain Sorted’s staff, and of course, Carmen Carey, the only surviving senior figure (Grimes had resigned as a director midway through the negotiations).
The news prompted a positive reaction from the market, with Location Sciences’ share price surging after the deal was announced. Although the deal still has to be ratified at a meeting of Location Sciences’ shareholders on 16 February, it seems like Sorted might finally be on a path to deliver profitability.
