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Diversis Capital buys food safety tracking software provider

Increasing concerns over food safety and compliance with related legislation has catalyzed recent private equity investment in food safety and traceability.

Los Angeles-based private equity firm Diversis Capital has acquired foodservice industry software as a service (SaaS) provider Arrowstream, the firm announced Tuesday.

Arrowstream provides software to manage delivery and supply logistics under its OnDemand and Crossbow brands. OnDemand is designed to help food chains and purchasing co-ops control supply chain risk, while Crossbow focuses on managing inbound logistics.

Based in Chicago, Arrowstream’s clients include Jamba Juice, Panda Express and Steak ‘n Shake, according to the firm’s website.

“As the industry becomes more heavily scrutinized due to the enactment of the FDA’s Food Safety Modernization Act, Arrowstream is well positioned to take advantage of a tremendous opportunity in a market that is rapidly requiring and adopting technology focused on supply chain and food traceability,” Diversis managing director Kevin Ma said in a statement.

Increasing concerns surrounding food safety and the need to comply with legislation such as the Food Safety Modernization Act (FSMA) has catalyzed recent private equity investment in food safety and traceability.

Traceability refers to the ability to track food through all stages of production, processing and distribution, while SaaS is a software licensing and delivery model in which software is centrally hosted and licensed on a subscription basis.

Signed into law in early 2011, the FSMA grants the Food and Drug Administration enhanced oversight authorities, establishes new food safety plans at food processing facilities and farms, and enhances traceability capacity, among other wide-ranging changes. After years of delay attributed to a slow-moving internal review of proposed rules, the impacts of the new rules are beginning to take effect.

Diversis said in its statement that the firm plans to invest “heavily” in Arrowstream and its existing software platforms.

“Visibility into their supply chain to reduce costs and improve quality and brand consistency is of critical importance to major food chains, and Arrowstream has a successful track record of providing this transparency to its customers,” Diversis said in its statement.

Warburg Pincus portfolio company Hygiena acquired DuPont’s food safety diagnostics business in December and September saw the acquisition of Roulier Group food and agriculture hygiene-focused subsidiary Hypred by Ardian, a French private equity firm.

In October, Paine & Partners acquired Global ID, a food-safety testing group, and told Agri Investor of its plans to use the company as a platform for further acquisitions in the sector.