In some ways, coming out of a recession can be as chaotic as going into one. Because company size and behavior affects how a trucking business fares during tough economic times, not all businesses will be on equal footing when the market picks up. Consider it survival of the fittest.
Rates of mergers and acquisitions almost always increase after a downturn. By joining forces with complementary companies, business owners can strengthen weaknesses, take advantage of new savings opportunities, and insulate their company against future downturns by increasing size. However, mergers in the trucking industry aren’t without risks. Is merging with another trucking business a solution for your company? It depends.
The long-term goal of a merger is to expand in order to benefit from greater revenue and lower costs. Any smart and strategically-minded business owner can expand under the right circumstances. But what often makes a merger or acquisition a better choice than organic growth is that savings are almost instantaneous.
For instance, expanding slowly requires recruiting and training new drivers. However, a merger can immediately increase your driver base with qualified and experienced individuals, a luxury amid the current driver shortage. If you’ve always leased equipment, teaming up with another company can give you the opportunity to buy at a bargain price. Perhaps your business has always been interested in investing in a type of vehicle or asset. Buying a trucking business with that equipment may make the investment affordable.
Moving into a new market takes time. Namely, businesses have to gain the trust of new customers while competing with rivals that already serve those clients. Merging with a similar business can accomplish both of these objectives. When you buy a carrier that already serves a list of shippers, you don’t have to woo new customers because they are included in your sale.
Rather than expend money on marketing plans and freight brokers, you can focus efforts on customer service. Keep in mind that a client list isn’t a guarantee of future clients. Customers may not stick around during a shakeup such as a merger. Your success in buying a trucking business is often directly related to how you handle the transition period after the purchase. Companies that can maintain the appearance of stability are more likely to keep clientele and become quickly established in their new territory.
Mergers may be the most cost-effective way to grow a company. However, many mergers fail within just a couple years. Does this mean that a merger is too risky for your trucking business?
Often times, a pairing makes perfect sense on paper but becomes problematic in practice due to incompatible cultures. Think of a merger as a marriage. Two business owners may like and respect one another, but if their core philosophies and values are drastically different, it’s unlikely that the union will last. When office cultures are similar, however, it will be far easier to smoothly navigate the post-sale waters.
It’s easy for new owners to come into a deal ready to cut costs and change policies, but it may be better to hold off on drastic action until the dust has settled. The most successful mergers occur in a stable and controlled environment. This is where truck business brokers come in handy. An experienced transaction professional can maintain the confidentiality needed to protect employees and customers during a deal while initiating the meaningful discussions necessary to ensure both parties receive the benefits they need.