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Trucking executives share M&A experience, pitfalls

ORLANDO, Fla. — Trucking company owners looking to sell their business or buy a new one got an hour’s worth of advice here from three executives who recently went through the process.

“Whether you want to sell or not, if you don’t have a succession plan in place or you don’t have someone who is capable of stepping into your job, I think that’s a big problem and a big red flag,” said Mark Seymour, president and CEO of Kriska Holding, at the Truckload Carriers Association annual meeting on Tuesday.

A Canadian carrier specializing in cross-border freight, Kriska Holding has completed recent purchases including Will’s Transfer in 2020 and Transport N Service in 2021.

“If I’m the buyer and I see the business is tied to you and you want to leave, that’s an issue, because someone has to run that business at least for a short period of time,” Seymour said. “The acquirer doesn’t know anyone in your business, doesn’t know anything about your business. So whether you’re looking to sell soon or later, have a succession plan in place that’s very clear.”

For buyers expecting the current owner and/or CEO to stay on in an executive role, “you have to remember, they’re not financially driven anymore,” pointed out Heath Treasure, whose Idaho-based carrier, Super T Transport Inc., was acquired by Austrian transportation and logistics provider Berger Logistik in September.

Super T sold its shares to the international company, which is partly owned by Red Bull. Under the new partnership, Berger Logistik is using Super T to move products for its energy drink-producing parent. Treasure maintains his role as president of Super T.

“You have to come up with something that drives that CEO or president,” Treasure advised, “because you’ve just helped put him in a really good financial place, so what’s going to get that CEO up and motivated in the morning that’s not attached to money? In my case, I’ve got to hitch my mind on different things to get up and get going. So find something that continues to motivate that CEO to help run your company.”

Asked by panel moderator and TCA President Jim Ward what’s driving a surge in mergers and acquisitions in today’s down market, Barry Pottle, who sold Hermon, Maine-based Pottle’s Transportation in October to Canadian carrier Bison Transport, pointed to higher equipment costs and declining trucking rates.

“With customers, you negotiate rates with them, you think they’re good for a year or two, and they’re coming back six months later and wanting to readjust them,” Pottle said. “I think smaller carriers are having a hard time balancing that, and it gets to the point where they don’t want to deal with it anymore and decide to sell.”

Seymour also noted that in the current M&A market there’s “probably a heightened disconnect between what buyers will be willing to pay and what sellers think their businesses are worth. “Companies are coming off what may be the best year they’ve ever had, which gives confidence that maybe their business is worth more now than ever,” he said. “I would caution you that’s not likely to be the case. What we experienced in 2022 we could only hope will happen again soon, but it probably won’t.”

To counter that disconnect, Seymour warns against being in a hurry to find a partner to either buy or sell to.

“Before you get into the financials, spend a lot of time upfront together with the people, and mine the DNA of the buyer and the organization. Round pegs don’t fit in square holes. I can tell you from experience, and we’ve made some mistakes. I’ve probably bought 30 small companies, all 100 trucks or less. I have enough experience to know that speed kills, and if you go too fast, you’ll likely make a mistake, on either the buy or sell side.”

All three urged against putting a time limit on the due diligence process — particularly among those who are thinking of buying — which can typically take anywhere from two to six months.

And for buyers, getting a valuation range for your business is particularly important — but not necessarily from your accountant.

“Accountants don’t write checks, and they don’t buy businesses,” Seymour said. “And if you sell your business they’re going to lose you as a client, so I might suggest that you get a second opinion from someone outside your realm of trusted advisers. Getting that independent third-party advice is really important because your emotional value of the business is not likely something somebody’s going to be willing to use as enterprise value.”

Treasure agreed on the value of hiring outside expertise.

“If you’re a midsize fleet and looking to acquire or sell and you don’t do it regularly or at all, and don’t have an internal team [knowledgeable about M&A] I would recommend finding an M&A company to align with,” he said. “You might think those guys make a sizable amount of commission, but, done right, you’re going to make the correct purchase or sale, and the commission will be worth every penny.”


Click for more FreightWaves articles by John Gallagher.