Across the U.S., merger-and-acquisition activity is affecting the trucking competitive landscape in profound ways. Whether you are interested in selling or not, you are probably receiving knocks on the door. No matter the stage of your company’s life cycle, it is important for you to understand what may help or hinder your ability to sell your business when the time is right. Below are 16 reasons your trucking business won’t sell.
1. Lack of growth
If you want buyers competing for your business, you need a compelling growth story that captures their imagination. Stagnation does not inspire generous offers.
2. Owner dependence
If you want to get paid, get out of the way. The most common reason owners attract discounted offers is because they create an unnecessary amount of risks through dependence on themselves. Create clear job descriptions and expectations for your employees. Empower them with authority and resources to do their job. Accept that nobody is going to do the job exactly how you would do it. Let go, and watch your business value explode.
3. Inconvenience
Convenience requires a luxurious cost you can’t afford. Recently I met an owner who chose to ignore an offer from a qualified buyer for six months. The owner’s daughter was getting married, and he was in the middle of an audit. By the time he got around to responding, the buyer had reduced the offer by $4 million. Engage!
4. Incompatible driver base
Buyers don’t value drivers. They value the right drivers. Make sure you are creating a driver pool and safety culture that will be transferrable to a motivated buyer. Three of our last five trucking business sales have included purchase prices that were adjustable based on driver retention.
5. Old equipment
Stay current or get left behind. Smart buyers know when fleet investments have been kicked down the road. Offers are almost always adjusted to account for delayed capital expenditures.
6. Toxic/apathetic culture
This happens often when employees who want to see the business grow are not given the opportunity to make it happen – usually because their owner has stopped taking financial and strategic risks. When the owner takes the foot off the gas, employees tend to mirror the same behavior. They lose their edge and so does the company when it comes to safety and other standards of excellence. Buyers notice and often move on.
7. Seller’s valuation
Educate yourself about the value of your own business through a third-party valuation. Make a defensible case for your company’s worth. Don’t unknowingly ask a buyer to make a financial decision you would never make or to take a financial risk you would never take. You might sabotage a very good offer.
8. Seller or buyer rigid on sale type
There are a lot of ways to get a deal done. Be flexible. Focus first on the goal to achieve and, second, on the means in which you achieve the goal.
9. Unreliable record keeping
Pretty simple. Get your financial house in order or lose big money.
10. Customer concentration
When it comes to revenue concentration in one or a few customers, sellers need to understand the associated risks to the buyer and be prepared to account for those risks in the structure of the deal.
11. No consideration for tax implications
Yes, the government is going to participate in your sale proceeds. If you go out of your way to pay more taxes than what the law requires, your deal may not make it to the finish line. Sellers who win big invest in transaction tax specialists before closing the deal.
12. Lawsuit or fatal accident
Don’t allow procrastination to invite these deal killers into your life. If you sense you have lost your edge or fire in the belly, you need to remove yourself from any potential exposure that could have a devastating impact on your exit from the trucking industry.
13. Inept attorneys
Get a deal maker. Not a deal breaker. And, please don’t allow your brother-in-law or golf buddy to handle your purchase agreement. Seek help from proven transaction attorneys who understand the uniqueness of this industry and who their living working on deals
14. Health crisis before or during sale process
Buyers associate your personal health with the health and value of your business. Sell when you are healthy, when you don’t have to, and the offers you attract will be structured accordingly.
15. Upside down balance
Nothing should have more influence over the timing of your sale than the state of your balance sheet. Make sure you know what is going on in the M&A world before you make long term capital commitments that may take the timing of your sale out of your hands.
16. External factors
Give yourself enough runway to avoid unnecessary concessions. Example: Your perfect buyer can’t consider buying your business today because he is still integrating another trucking acquisition. No problem. If you are early to the process, you can discreetly go about making the business better and more valuable while waiting for the right buyer to return to the table – without conceding any unnecessary deal points.
Spencer Tenney is president and CEO of Tenney Group, a merger-and-acquisition advisory firm dedicated to the transportation industry since 1973. Tenney Group primarily helps business owners sell trucking companies with annual revenues ranging from $10 million to $200 million.
