Part One: Advice on selling your privately held logistics/transportation company
Many owners choose to sell their businesses rather than pass them on. Fortunately, this is an opportune time as investors are sitting on a lot of capital and logistics and transportation businesses are looking to expand through acquisitions. But selling a family-owned or closely-held logistics and transportation company can be a fulltime job in itself.
Hire an investment banker Preparing a company for sale is a job in itself that entails setting up a data room, engaging in conference calls, trying to keep the effort confidential and so on. An investment banker will compile market comps, quietly shop the company to select targets and serve as an intermediary between the buyer and seller.
Michael Golden, partner in Arnall Golden Gregory’s Corporate and Securities Practice, said: “The deals that have the highest likelihood of closing with the least difficulty involve an investment banker,”
Identify your buyer A private equity fund, a family office private company and a corporate (strategic) buyer will make different demands. Private equity and family office buyers often require that the seller stay invested in the company and that leadership remain in place for a year or two until transition difficulties are ironed out.
A private equity buyer is more likely to hold the company for a shorter period, until it’s ready for sale again. In that scenario, a seller would want to think about whether the investor’s plans align with how the seller views his or her legacy. A corporate buyer is more likely to bring in new leadership rather quickly and merge operations.
Does that mean relatives and friends will lose their jobs? Some investor buyers also might replace leadership right away.
Conduct a legal audit An experienced corporate attorney should examine contracts, organisational structure, intellectual property protection, etc. “You want to find a problem before the buyer does,” Mr. Golden said. He relayed the story of a young software developer who was working with someone in India without an agreement.
When it came time to sell the business, the owner learned he didn’t own 100 percent of his product. That would have been avoided by crafting an inexpensive agreement with the offshore contractor at the outset. The seller ended up paying the contractor $20,000 to acquire all rights to the technology before selling the business.
Make sure the financials are in order Usually, companies are started by visionaries or someone with a sales background – not accountants. Many privately held companies often do not have audited financial statements or keep proper track of their purchase orders. Additionally, many privately held companies maintain their financial books on a cash basis rather than on an accrual basis. The above will be seen as deficiencies by buyers and will significantly impair the ability of the company to be sold. A review by an accountant is essential if a company is going to look its best to a buyer.
Michael D. Golden, organized a panel at the recent Georgia Logistics Summit that addressed critical issues to consider when selling a company. Joining Michael on the panel were Rob Adams, managing director, EVE Partners, LLC; Vince Eget, partner, Bennett Thrasher, LLP; and Heidi Green, managing partner, Perdue Partners, LLC.
Driver shortages: Why the industry needs to be worried
While driver shortages are a global problem, with a recent survey from the International Road Transport Union suggesting that driver shortages are expected to increase by 25% year-on-year across its 23 member countries, the issue has very much made itself felt for UK businesses in recent weeks.
A perfect storm of factors, which many within the industry have been wary of, and warning about, for months, have led to a situation wherein businesses are suddenly facing significant difficulties around transporting goods to shelves on time, as well as inflated operating costs for doing so.
What’s more, the public may also see price rises as a result due to demand outmatching supply for certain product lines, which in turn brings with it the risk of customer dissatisfaction and a hit to brand and stakeholder reputation. Given that this price inflation has been speculated to hit in October, when the extended grace period on Brexit customs checks comes to an end, the worst may be yet to come.
"Steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole"
That said, we have already been hearing reports of service interruption due to lack of driver availability, meaning that volumes aren’t being transported, or delivered, to required schedules and lead times. A real-world example of this occurred on the weekend of 4-6 June with convenience retailer Nisa, with deliveries to Nisa outlets across the UK affected by driver shortages to its logistics provider DHL.
But where has this skills shortage stemmed from?
Supply is the primary issue. Specifically, the number of available EU drivers has decreased by up to 15,000 drivers due to Brexit alone, and this has been further exacerbated by drivers returning to their home country during the COVID-19 pandemic, as well as changes to foreign exchange rates making UK a less desirable place to live and work. This, alongside the recent need to manage IR35 tax changes, has also led to significant inflation in driver and transport costs.
COVID-19 complications have also meant that there have been no HGV driver tests over the past year, meaning the expected 6,000-7,000 new drivers over the past year have not appeared. With the return of the hospitality sector we understand that this is a significant challenge with, for instance, order delivery lead times being extended.
It is little surprise, therefore, that the Road Haulage Association (RHA) earlier this month became the latest in a long line of industry spokespeople to write to the government about the driver shortage for trucks. The letter echoed the view held by much of the industry, that the cause of this issue is both multi-faceted and, at least in some aspects, long-standing.
So, many in the industry are in agreement as to the driving factors behind this crisis. But what can be done?
Simply enough, outside of businesses completely reorganising their supply chain network, external support is needed. In the short-term, the government should consider providing the industry with financial aid, and this can also be supported more widely with legislative change.
Specifically, immigration policy could be updated to place drivers on the shortage occupations list, which would go some way towards easing the burden created by foreign drivers returning to their home countries. Looking elsewhere, government should also look for ways to increase the availability of HGV driver tests after the blockage created by the coronavirus lockdowns.
Looking more long-term, steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole. As it stands, multiple sources suggest that the average age of truck drivers in the UK is 48, with only one in every hundred drivers under the age of 25. We must therefore do more to increase the talent pipeline coming into the industry if we are to offset more significant skills shortages further down the line.
On the back of a turbulent year for the supply chain industry, it has become increasingly clear that the long-foretold shortage of drivers is now having a tangible and, in places, crippling effect on supply chains.
Drivers, and the wider supply chain industry, have rightly been recognised for the seismic role they played in keeping the nation moving and fed over the past year under unprecedented strain. If this level of service is to continue, we must now see Government answer calls to provide the support the sector needs, and work hand-in-hand with the industry to find a solution. If we do not see concrete action to this effect soon, we are likely to be in for a turbulent few months.
Rob Wright is executive director at SCALA, a leading provider of management services for the supply chain and logistics sector