A carrier’s owner must have a succession plan – whether they are planning to sell the business or not.
It is a red flag for a prospective buyer as they do not know anything about the company and will need someone to run it for a while, said Mark Seymour, president and CEO, Kriska Transportation Group. “If it is all about you, it’s a problem,” he said.
Industry leaders speaking at Truckload Carriers Association’s annual convention in Orlando, Florida agreed that carriers must have a change management plan in place.
Heath Treasure, president, Super T Transport added that carriers must work on preparing to sell even if they are not selling, so they know their value. He sold his company in 2022 to a logistics company partly owned by an energy drink manufacturer.
“Timing is everything, we started working on our plan three years ago,” he said, adding that every small- to mid-size fleet should have its due diligence portfolio ready.
Barry Pottle, past president and CEO of Pottle’s Transportation sold his company to Bison Transport after 45 years at the helm. He was thinking about it for a couple of years and was looking for a company with the same values and culture. “Bison gave my people great opportunities,” he said.
Seymour said a business is of greater value to a wider group of parties if the owner is still contributing, healthy and relevant. “I might sell in the future, I don’t want to wait until I am done,” he said.
Treasure said if buyers are expecting the seller to stay on in an executive role, they must come up with something that drives them. “They are not financially driven anymore,” he said.
Seymour emphasized the need to take it slow when buying or selling a business. “I’ve bought 30 companies and have made some mistakes. Speed kills, if you go too fast you are likely to make a mistake.”
He said there is a heightened disconnect between what buyers are willing to pay and what sellers think their business is worth. “Expectations need to be balanced. There will be opportunities in 2023,” Seymour noted.
The emotional value might not be the price value. An evaluation from an accountant is great, but obtain a second opinion from outside the realm of your trusted advisors, Seymour said. That could help you find an average of the price.
A seller must check what the company is worth after paying off equipment and taxes, Pottle added. There may not be much money left after factoring those into the equation.
Go with experience
Seymour also added a word of caution. Deal with people who have been there, made mistakes and learnt from them. “Look for people with experience, they will stumble less,” he said. If the buyer has not done it before, it will not be a bad outcome, he noted, but the process could be arduous.
Treasure recommended hiring mergers and acquisition specialists. “They are knowledgeable, and although the commission can be significant, if done right, it is worth it,” he said.
Seymour said acquisitions are a way to grow as organic growth is hard. There are advantages on the cost side due to economies of scale.
Challenges force sales
So why are people selling their businesses? Treasure said some are retiring and others don’t want to continue in a weak market. Fuel costs and high interest rates are making things challenging, he added.
Pottle said equipment prices have skyrocketed. Smaller carriers are also facing pressure from customers to readjust rates a few months after agreeing on them. This is driving sales of smaller businesses, he added.