More and more, mergers and acquisitions in the trucking industry are becoming commonplace. These transactions involve a tremendous amount of legwork and research before they can be completed. Let's dive into what you need to know about these mergers. We'll cover the following:
First, let's discuss why mergers and acquisitions have become more prevalent than ever in recent years. The trucking industry saw a boom in 2018 because of various economic factors. As such, many trucking companies found themselves at a high point for profitability since the turn of the century. However, market conditions have tapered off over the past few years. Some of this is due to a dip in the economy. The rest of it is has to do with the market resetting itself to more standard conditions. Let's take a look at what impact this has had on two different groups of carriers.
This impact has been especially great on smaller trucking operations. Whereas they may have turned profits in 2017 and 2018, the reality of 2019 and 2020 was very different. Trucking rates have gone down, and capacity for smaller carriers, such as less-than-truckload specialists, has dwindled. Meanwhile, insurance premiums have spiked. As such, these smaller carriers have found themselves ready to sell.
Coincidentally, the larger trucking companies are actually clamoring to buy. Competition between companies for quality, experienced drivers is fierce. With general freight capacity also shrinking, larger companies are looking to add customers wherever they can. By acquiring smaller companies looking to sell, larger companies are achieving both of these goals. They're acquiring a veteran group of drivers without having to compete for their services. They're also absorbing the preexisting customers and relationships that the smaller company already has. This is a quick way to expand a business as well as create capacity where it may not have previously existed.
First, let's clarify that mergers and acquisitions, while similar, are different.
Mergers refer to when a company finds it would be beneficial to combine with another company of roughly equal assets and value. Essentially, it's a 50/50 partnership between two companies to form into one larger company. Usually, significant organizational restructuring happens with a merger. Rather than absorbing a company and its people, as is common in acquisitions, mergers deal with high-level people in equal positions across both companies. This takes careful planning and consideration to iron out how they will proceed.
Conversely, an acquisition involves one larger company absorbing a smaller company by taking a majority of ownership shares. This results in the smaller company's assets now falling under the parent company's umbrella. Generally, the purchasing company will retain its original name and branding. There's minimal organizational restructuring in an acquisition.
Whether you're considering a merger or an acquisition, these agreements happen in order to serve the best interests of all parties involved. There are a number of steps to take and things to consider before deciding to merge with or acquire another company. Do the financials make sense? What will the new leadership structure look like? What concessions will you need to make? The dynamics of the new company will likely be largely different.
Next, let's discuss how to integrate technology and accounting from two companies into one.
Two of the most important elements of a merger or acquisition are integrating technology and accounting from both companies. Tech and accounting are two of the most important parts of almost any business. Bringing two tech departments and two accounting departments into single, efficient entities will increase the productivity of your new company.
Let's begin by looking at technology integration.
You'll want to consider a number of factors when determining which elements of technology to bring together and how when merging. Here are a few of these factors:
As with technology, there are many factors you need to evaluate when integrating accounting systems. Let's examine a few of them below.
One last piece of advice on integrations has to do with who is handling these transitions. If possible, it makes sense to bring in a third party to mediate these processes. It's common for the emotions of people at both companies to run high in an initial power struggle. Having a third party whose focus is solely on successful transition will smooth the process considerably.
There are many more items for a comprehensive checklist than can be provided for you here. However, let's look at some of the broadest things that you should include. Keep in mind that each of these categories have numerous subcategories that you'll also need to go through.
Mergers and acquisitions create perhaps the largest period of upheaval in a company's history, regardless of which side you're on. The process can be long, confusing, and exhausting. However, with careful planning and taking the appropriate steps, you can succeed. At the end of the transaction, you'll likely feel a great sense of relief.
Yet that ending is truly only the next beginning. Your new company organization is now complete. You'll embark on a new journey together, with employees and coworkers old and new. Together with partners you can embrace the future and create an environment of positivity and productivity. Then, you can all enjoy your new profitability.
This post was written by Matthew Zandstra. Matt has been working in transportation and logistics dispatch for the past six years, both as a broker and direct to drivers. He’s familiar with various facets of relationships, technical systems, pricing mechanics, and commodities.