Selling a Trucking Company

Buyer analysis is one of the duties your transportation Business Broker will perform.  Logistics industry growth opportunities attract many buyers, but not all will be a good match for your company.

You will start getting offers from potential buyers once you advertise your cargo shipping business for sale, and beginning the due diligence process with a Buyer who doesn’t have access to financing or who isn’t serious will result in a waste of time.  You could miss out on an offer from a serious Buyer if you don’t vet buyers properly.

The business intermediary you work with will start this process by qualifying potential buyers and contacting them to advertise the offer.

Potential buyers can be competitors, employees, investors, Private Equity Groups, family offices, corporate investors, and other entities.

Competitors make for an interesting pool of buyers.  There is a strong potential for growth through buying a competitor.  Businesses can expand the range of services they offer through buying or acquiring a company and spend fewer resources on competing to buy the competition strategically. 

It’s essential to exercise caution when dealing with competitors.  The documents needed to sell a business include financial statements, agreements, and other documents that will give your competitors access to the ins and outs of your business’s operations.  If the deal falls through, you could end up with a competitor who knows too much about your business.  A broker can identify serious buyers so you don’t reveal too much information to a competitor.

Main Street business intermediaries can also identify corporate, strategic, and synergistic buyers.  These buyers have a plan to achieve growth through acquisitions.  These companies might not be buyers that you would consider.  Still, a broker can identify these buyers and analyze whether your shipping container business for sale is a good match for their M&A strategy.

Acquisition-Oriented Businesses

Main Street California businesses for sale can attract acquisition-oriented buyers.  A broker can help you set up this type of deal, and you might find that your business is worth more to a Buyer with a specific acquisition strategy.

Acquisition-oriented businesses pursue strategic growth as their primary goal.  They might look for Main Street business opportunities to grow an existing business or purchase your freight business for sale to leverage existing processes.

Here are some of the strategies these buyers might pursue:

• Some buyers will consider investing in a trucking business to improve its performance and profitability.  Strategic buyers will often look for businesses with low-performance numbers or undervalued organizations to get the best return on their investment.

• Acquisition-oriented businesses sometimes use consolidation strategies.  Competition can become difficult when the offer exceeds the demand for a service.  Consolidating competing businesses into one entity that offers a single service often makes more sense.

• Market access is another strategy buyers might use.  If your company can offer a service but doesn’t have access to the right market because of its location or small size, getting access to a bigger platform through an M&A deal can facilitate market access through its existing customer base or location.

• Some buyers are after skills, technology, IP, and other assets.  A Buyer might not be interested in operating the company they buy.  They might want to purchase because the business holds assets that would add value to the existing company, including a skilled workforce, patents, or equipment.

• Transportation business opportunities can attract strategic buyers because of scalability.  A company that uses a transport and logistic service can scale up its operations and reduce costs by buying a truck company instead of outsourcing delivery.

• The freight and logistics M&A landscape in 2021 revealed opportunities for growth in this sector, even when other industries struggled because of the pandemic.  This strong potential for sustainable growth attracts buyers looking for transformational mergers.  These mergers allow a struggling business to enter a new market and offer new products or services using an existing platform.

A transportation Business Broker can analyze your business and find areas that create value for strategic and synergetic buyers.  They can reach out to these buyers and highlight the processes and assets that would be a good match for the acquisition strategies of corporate or strategic buyers they have identified.

What Does an Advisor Manage During a Business Sale?

A broker will assist you with the following phases and activities.

Exit Plan

An Intermediary will help you establish a business exit strategy.  This plan will outline the best business selling path and include strategies and marketing activities for listing and promoting the offer.

The exit plan will also identify the most relevant business valuation method, include a list of potential buyers, and outline the broker’s steps for vetting them.

Deal Origination

Your business Advisor will create an outreach program to contact vetted buyers and get them interested in your trucking business for sale in California.  They will pitch buyers and generate leads by focusing on the unique value your operation represents based on each Buyer’s position.

In addition to engaging in social selling, your intermediary can create and distribute information to advertise the business for sale and reach a broader range of buyers.

As offers start coming in, your Advisor will analyze and evaluate them.  They will provide advice to help you select the best offer for your personal goals and the future of the freight brokerage company for sale.

Negotiation and Buyer Due Diligence

Your broker will help with the negotiation process.  They will assist with creating a Letter Of Intent that works as a non-binding agreement between the parties to establish a timeline and some general terms for the deal.

Anyone interested in buying a transportation company will have an M&A financial due diligence checklist.  Your broker will help the Buyer perform their due diligence process while maintaining confidentiality.

Here are some of the documents they will provide the Buyer with:

• Income statements
• Records of accounts receivable and payable
• Balance sheets
• Tax returns
• Business activity statements for the past three to five years
• Profit and loss records for the past two to three years
• Cash deposit and payment records
• Utility accounts
• Statements for bank loans and loans of credit
• Meeting minutes
• Audit work paper files if applicable
• Your written claims about the business and why you’re selling it
• Privacy agreements
• Compliance-related paper trail
• Inventory records
• Any paperwork related to equipment, fixtures, and vehicles
• Records of intellectual assets, including IP, trademarks, and patents
• Contract with employees, vendors, and clients
• Partnership agreements
• Leases
• Details of your automated financial systems
• Credit history
• Business valuation information

Avoiding Common Warning Signs

When scouting logistics companies for sale, buyers will have a list of warning signs to watch out for.  A broker can help you provide everything the Buyer needs for their due diligence process without raising any of these common red flags:

• You refuse to share important information or won’t give a valid reason for wanting to sell the business.

• You won’t agree to a trial period during which the Buyer can complete their due diligence process.  It’s common to agree to a trial period of at least 30 days.

• You’re reluctant to let the Buyer meet suppliers, partners, and other key people.

• You want to move too fast and close the deal quickly.

• There are legal proceedings you didn’t disclose.

• There are issues or inconsistencies with your credit history.

Negotiating the Definitive Purchase Agreement

Offering middle-market businesses for sale involves several steps.  The broker works closely with you and your legal Advisor, especially while negotiating and finalizing the Definitive Purchase Agreement.  This Definitive Purchase Agreement helps both parties reach their goals for the transaction and allows no room for error as it ultimately represents the legal wishes of each party. 

A good M&A Definitive Agreement is the lynchpin of a good transaction.  It brings together the Seller and Buyer exchanges of information from different sources over many months of conversations.  These exchanges are then condensed, with their interests, as best as possible into the Purchase Agreement. 

Items a typical Definitive Purchase Agreement may include:

1. Treatment of Shares, Options, and any other Securities, if appropriate to the transaction
2. Representations and Warranties
3. Covenants
4. Solicitation (“No Shop” clause)
5. Financing
6. Termination Fee (or “Break-Up Fee”)
7. Indemnification
8. Material Adverse Change (MAC) and Material Adverse Effect (MAE) Clauses
9. Closing Conditions

The Definitive Purchase Agreement can have potential pitfalls, so your Business Broker needs to keep communication open with the Buyer, their deal team, the Seller, and their deal team.

The M&A Definitive Purchase Agreement must also include details about tax obligations and consequences, especially if shareholders are involved.

Avoiding Pitfalls if you have a Buy-Sell Agreement

What if the Seller is two or more individuals?

Many businesses have multiple owners or shareholders.  Getting an agreement from most shareholders about selling the business and being willing to accept an offer can be challenging.  One of the shareholders may not be interested in selling the business or want something specific; most buyers will not agree.  If this is the case, hopefully, there is a Buy-Sell agreement in place, as this will outline what each shareholder needs to do.  A few years previously, I had a transaction with nine shareholders.  One shareholder with a minority interest initially refused to sell.  Eventually, they changed their mind, but it was stressful while this played out.

If no Buy-Sell Agreement is in place and there is tension between the owners and shareholders, deciding the future direction of the business may be challenging.  This article provides additional information for an owner or shareholder on how to avoid buy-sell agreement pitfalls.  Transportation business brokers should help their clients understand the importance of assuming liability so their buyers and sellers know who is responsible for any lingering claims. 

The agreement also needs to include information about indemnity clauses regarding operations.  For Transportation and logistics companies, concerns about environmental liability, breaches of warranties, and other issues need to be factored into the indemnity clauses of a Definitive Purchase Agreement. 

Buy-sell agreements can be confusing, so learning how to understand buy-sell agreements and how a buy-sell agreement can save a business is helpful.

Mistakes to Avoid When Selling a Transport and Logistics Business in California

I’m thinking about selling my trucking company.  Should I hire a transportation Business Broker?  Selling your business yourself might seem like an excellent option to reduce fees, but a broker can help you avoid common mistakes.

One of the main pitfalls to avoid is undervaluing your cargo ship business for sale.  A Seller will consider a business less valuable if you don’t provide a plan for future growth.  You need to identify growth opportunities and show which existing resources the business can deploy to pursue them.

Cash flow can also be an issue.  It shows the financial health of a business, and buyers will expect to spend less if your operation doesn’t generate a steady cash flow since they will have to invest more capital into the project.

Your client base can reduce the value of your business.  A Buyer will consider your business to carry more risks if you rely on a small customer base or use a few suppliers.  A few significant customers can be affected if one opts for a different vendor or can’t pay an invoice on time.  Your balance sheet can also suffer if one of the few suppliers you use goes out of business or increases its prices.

Buyers will look at competitiveness to assess the value of a freight forwarding business for sale.  They will want to know what sets you apart from your competitors and ask whether you compete on price alone or can offer a unique product or service.

A potential Buyer will consider the transition process and ask whether they can fulfill your role.  If you’re selling a business you founded, it might be difficult for a new owner to take over and ensure a smooth transition.

You can make other common mistakes if you try selling your business yourself.  Sellers sometimes reveal too much information during the due diligence process or withhold important information the Buyer needs.  You might not consider the tax or liability implications of the sale or settle for an offer that doesn’t reflect the value of your business.

A broker specializing in the transportation and logistics industry can help you avoid these common pitfalls by preparing your business before the sale.  They can review and update your growth plan, look for ways to increase your cash flow, and outline a strategy for a smooth transition so that you can offer more value to the Buyer.

A Business Broker can also identify other areas of operation that would create value for the Buyer and determine, based on their acquisition strategy, which potential buyers would get the most value out of your business.