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Monthly Archives

May 2015

Trucking Company Mergers & Acquisitions: Behind the Scenes – Part I

By | Blog, Transportation | No Comments

According to a statement made recently at the TIA conference in Orlando, there were more than 1000 deals made last year involving transportation companies. The expectation is that this year there will be over 1400 transactions. Why?

Do you want to be included in this exclusive ‘Former Owners Club’? Will your transaction, buy-side or sell-side, deliver the expected benefits? Let’s explore several reasons to sell and potential pitfalls of poor planning and execution.

It can be argued that fear is driving owners to sell – the risk of outrageous liability claims, potentially increased insurance coverage minimum requirements, commercial driver shortages, regulatory pressures, wages and freight rates issues, increasing cost of trucks and trailers and a host of other issues.

Another factor some consider is that the next generation is not interested in the transportation sector or succeeding dad or mom; “if it’s not tech, it’s not good” say the millennials.

The real reasons for so much activity from the point of view of the sellers are:

  • There are a lot of potential buyers for the same target companies
  • Sellers can get more than “top dollar” – six, eight or even ten times earnings is a common formula
  • Sellers are motivated because the stock market provides exciting options to invest
  • Sellers know that a drop in the stock market could change the game quickly –the time is now (and has been for about 2 years)
  • Private equity firms are a second source of buyers compared to the years when only other transportation companies were potential buyers
  • There is a lot of money to buy and cash is a very likely payment method
  • The real currency in trucking today is drivers, more so than in years past; it’s no longer about buying customers and equipment
  • Selling truck freight capacity to shippers has more value than any other asset or service they have to offer
  • Organic growth is not very likely and efforts to increase margin over time are dim
  • Sellers know that rising freight rates and the improving economy provide the best environment for maximum sales price
  • The smarter owners that have been living off of high fuel service charges know that as fuel prices remain at presently reduced levels, their profitability could disappear. Time to get out?

On the other side of deals, buyers know that the transportation industry is fragmented. Many potential buyers know that with their current platforms the driver shortages will also limit their ability to grow so acquisitions or mergers make the most sense.

The transportation companies that have cash and robust balance sheets know that they can leverage their way into making an acquisition. In a different economic environment, this would not be possible. Companies often see as a new strategy acquiring smaller regional companies to help build density, especially in east west traffic lanes.

Buyers are interested in consolidations to offer services, technology and building scale that they might not easily be able to provide internally. Other reasons for the high level of acquisitions is to access and diversify customer concentrations, enter new markets and acquire proprietary know-how, especially technology.

Of particular importance in these transactions is the potential failure or at least major complications that often arise from these transactions, sometimes immediately and perhaps even after weeks or months after closing.

The three most common results of a ‘bad’ deal arise from:

  1. Failure to prepare properly and plan for a transaction
  2. Failure to do proper due diligence or not challenge assumptions effectively
  3. Failure to anticipate and execute the economies of scale and implement and protect the culture and changes that result

In Part II of this article we will explain these three steps and provide a blueprint to help you increase your company’s value, properly plan for a transaction and help you make the transition as a seller with a company to an employee of your former company.

To help you analyze a potential target company or your own, download a complimentary copy of my Buy Side/Sell Side – Due Diligence Checklist for Trucking Logistics.

Politics Trumps Leadership?

By | Blog, Executive / Entrepreneur Leadership, Transportation | No Comments

In corporate America leadership is about having a vision, inspiring others to support that vision and maintaining the clarity and decision-making power to know the right things to do to make something good happen. It is about trusting and being trusted. Great business leaders do not concern themselves with public opinion or politics, but with making the customers, employees, vendors and shareholders realize an appropriate level of gain for their efforts and investment.

In Baltimore it seems quite obvious that elected officials exhibited a different view of what leadership is amounting to little more than making reactive decisions and taking (or not taking) actions apparently motivated by politics. Inevitably, it is fair to conclude that the sum total of their actions could result in another round of major civil disturbance on some near-term future date.

It is true that facts aren’t facts until they are known, but more often than not, police investigations take weeks or even months to complete. In Baltimore, however, within a few days of the incident, it appears that the information available was indisputable mostly based on a citizen provided video that gave rise to a press conference where pages of ‘facts’ were presented in narrative form by the state attorney against six police officers.

Guilty until proven innocent was real clear in the tone and voice of the press messaging. Politics or leadership? Justice or political correctness?

The mayor then announces the handling of sweeping reforms of the police department that has been somewhat out of control in certain parts of the community for years. So where has she been?

Is it possible the lack of leadership is the casualty of being focused on a greater goal – the satisfaction of political correctness with an eye always to the next election instead of doing what these people were elected/appointed to do? Run a city, take care of the citizens and properly administer justice for defendants, not the family, not the victim and not the political process.

Right or wrong on any of the issues is not what is important here – what is important are the issues with leadership and the failure to act and the consequences the community suffers as a result. In business, CEOs lose companies, customers and their jobs for committing improperly motivated acts.

The apparent lack of leadership in anticipating possible events led to the fallout of a very unhappy community over an alleged mishandling of a suspected lawbreaker, the failure of the police to step in and quell disorder rather than stand around and look at lawbreakers, the failure to call for help when needed.

One can argue that behind the scenes the decision-making was based on facts as yet known but not released to the media or the public and therefore the “right” moves were made despite the consequences.

So now the politicians argue that the lessons learned were useful, but at great cost. We will do better next time. Really?

The notion that lessons learned have any real value is false. Lessons used in business, in life, and politics are what really counts and what the community should be able to count on.

So, in the final analysis, was leadership exhibited by telling police to stand down; let the community have space to exercise their constitutional amendment rights despite the high price the community ultimately paid in injury and damage?

Leaders who delay actions and make political decisions don’t protect their employees and will ultimately fail long term.

Dithering is not part of good leadership. As leader of the city, did the mayor exhibit the sort of leadership needed or the sort of leadership necessary to get reelected?