The Ultimate Guide To Help Sell a Trucking Company

What Is the Role of M&A Advisors in Selling a Transportation and Trucking Company?

I want to sell my business, what should I do next? You should consider hiring an M&A Advisor to help you navigate this process. The role of a broker is to arrange a transaction between a buyer and a seller.

M&A Advisors will bring their experience and expertise to the table and help you negotiate the best deal possible. Their role is to prepare your business for the sale, vet buyers, teach you how to prepare an exit strategy, and assist you with technical questions like the tax implications of the sale.

There are many benefits to consider when hiring an M&A Broker. You can get a better price for your freight brokerage business for sale and avoid wasting time with buyers who are not a good match.

Buyer Analysis

Buyer analysis is one of the duties your M&A Broker will perform. Logistics industry growth opportunities attract a wide range of buyers, but not all of them are going to be a good match for your company.

You will start getting offers from potential buyers once you advertise your cargo shipping and trucking business for sale and starting 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 M&A Intermediary you work with will start this process by qualifying potential buyers and reaching out to 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 acquisition since two or more mid market companies for sale can merge and control more market shares.

Businesses can expand the range of services they offer through an M&A deal and spend fewer resources on competing by merging with a former competitor.

It’s important to exercise caution when dealing with competitors. The documents needed to sell a trucking business include financial statements, agreements, and other documents that will give your competitors access to the ins and outs of how your business operates.

If the deal falls through, you could end up with a competitor who knows too much about your business. An M&A Broker can identify serious buyers so that you don’t reveal too much information to a competitor.

Middle market M&A Intermediaries can also identify corporate, strategic, and synergistic buyers. These buyers have a plan to achieve growth through mergers and acquisitions.

These companies might not be buyers that you would consider, but 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

Lower mid market businesses for sale can attract acquisition-oriented buyers. It’s a type of deal an M&A Broker can help you set up, and you might find that your business is worth more to a buyer who has a specific acquisition strategy in mind.

Acquisition-oriented businesses pursue strategic growth as their primary goal. They might look for lower middle market M&A opportunities to grow an existing business or purchase your freight and trucking business for sale to leverage existing processes.

Here are some of the strategies these buyers might pursue:

• Some buyers will consider buying a transportation, logistics, or trucking business so they can invest in it and improve its performance and profitability. Strategic buyers will often look for businesses with low-performance numbers or organizations that are undervalued to get the best return possible on their investment.

• Acquisition-oriented businesses sometimes use consolidation strategies. When the offer is greater than the demand for a service, competition can become difficult. It often makes more sense to consolidate competing businesses into one entity that offers a single service.

• Market access is another strategy buyers might use. If your company has the capacity to 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 make the 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 2022 revealed opportunities for growth in this sector, even when other industries struggled because of the pandemic. This strong potential for sustainable growth is attracting buyers who are looking for transformational mergers. These mergers allow a business that is struggling to enter a new market and offer new products or services by using an existing platform.

An M&A broker can analyze your business and find areas that would 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 the corporate buyers they have identified.

What Does a M&A Advisor Manage During a Business Sale?

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

Exit Plan

An M&A Intermediary will help you establish a business exit strategy. This exit plan will outline the best path to take to sell the business and will include strategies and marketing activities for listing and promoting the deal or offer.

The exit plan will also identify the most relevant business valuation method and include a list of potential buyers, along with steps the broker will take to vet these buyers.

Deal Origination

Your M&A Advisor will put together an outreach program to contact vetted buyers and get them interested in your trucking business for sale California. They will pitch buyers and generate leads by focusing on the unique value your operation represents based on where each buyer stands.

Besides engaging in social selling, your M&A Intermediary can create and distribute information to advertise the business for sale and reach out to a wider range of buyers.

As offers start coming in, your M&A 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 hauling and trucking company for sale.

Negotiation and Buyer Due Diligence

Your M&A Broker will help with the negotiation process. They will assist with the creation of 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 banks lines 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, transportation, or trucking companies for sale, buyers are going to 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 who 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 as quickly as possible.

• 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 M&A Advisor 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 completely represents the legal wishes of each party. 

A good M&A Definitive Agreement is the lynchpin of a good transaction. Both seller and buyer exchange a large amount of information from different sources.  This is often over many months of conversations.  These exchanges are then condensed, with their individual 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 M&A Advisor needs to keep the communication open with the Buyer and their Deal Team as well as the Seller and their Deal Team.

The M&A Definitive Purchase Agreement also needs to 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 a majority of the shareholders about selling the business and being willing to accept an offer can be challenging. One of the shareholders may not have any interest in selling the business at all or may want something specific most buyers will not be willing to 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 9 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, the pressure to decide the future direction of the business may be challenging.  This article provides additional information for an owner or shareholder with how to avoid buy-sell agreement pitfalls. To help their clients, M&A Advisors should understand the importance of assumption of liability, so their buyers and sellers know who is responsible for any lingering claims. 

The agreement also needs to have information about indemnity clauses regarding operations. For Transportation & 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 it is helpful to learn how to understand buy-sell agreements and how a buy-sell agreement can save a business.

Closing

Your M &A Advisor will play an important part during the closing process. They will establish a timeline for the deal and see it through by negotiating the terms and finalizing the contract. They will facilitate the financial transaction and make sure the transition is as smooth as possible.

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

I’m thinking about selling my trucking company. Do I need to hire an M&A broker? Selling your business on your own might seem like a good option to reduce fees, but a broker will help you avoid common mistakes.

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

Cash flow can also be an issue. It’s a measure of 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 that your business carries more risks if you rely on a small customer base or use a few suppliers. Having a few major customers can be an issue if one of these clients 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 their 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. It might be difficult for a new owner to take over and ensure a smooth transition if you’re selling a business that you founded.

There are other common mistakes you can make if you try selling your business by yourself. Sellers sometimes reveal too much information during the due diligence process or withhold important information the buyer needs to know. 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 who specializes 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 M&A Advisor can also identify other areas of operation that would create value for the buyer and determine which potential buyers would get the most value out of your business based on their acquisition strategy.