Business Polls show that business owners aren’t thinking far enough ahead about the future of their companies when they retire. However, that can’t be said for those carrier CEOs who packed OTA’s offices this week to hear from a panel of merger & acquisition experts and fellow fleet owners who successfully sold or passed on their businesses.
Succession Planning in the Trucking Industry
Succession Planning in the Trucking Industry – moderated by longtime OTA board member Mike McCarron, who recently spearheaded one of the most talked-about M&As in the trucking industry – featured Jeff Noble, director of the BOO SuccessCare Program; Robert Hickey, managing director RBC Mid-Market M&A; Scott Tilley, president and CEO of The Tandet Group; Wendell Erb, president of Erb Group; James Steed, president of Steed Standard; and Peter Hodge, President, peter Hodge Transport.
The event was deemed by attendees to be a huge success. After RBC and BDO painted a picture of the current M&A market landscape for attendees, a panel of fleet owners candidly shared their experiences, such as preparing for the inevitable exit and sale of their businesses; roadblocks when handing off or taking the reins of a new company; challenges in dealing with family when taking over from parents or passing on to a new generation; and critical factors for protecting assets and employees in any transaction.
RBC’s Robert Hickey explained how large consolidators continue to emphasize acquisitions as a key source of growth in their strategic plan and to strengthen expertise in geographic regions and grow their service offerings. Among the other trends he highlighted, include: Companies continue to make acquisitions, while mid-market remains most popular as synergies are easier to attain; Low interest rates and private equity dry powder favor another strong year of M&As; 70% of T& T CEOs surveyed expect corporate growth via acquisitions within the next 12 months.
Small Fleet Succession Planning
Later, McCarron led a discussion on how small fleets – the backbone of the Canadian trucking economy, as he called them – would be prepared to ride the coming M&A tide. “Yes, it’s definitely getting tougher for (small fleets) to compete,” responded Wendell Erb. “But at the same time, many of these companies are very agile. I don’t know if the little guy, if he’s sophisticated, will ever be gone. But certainly there is a type of small carrier that will continue to be challenged.” Added Tilley:
“There will always be a place for large carriers serving multiple markets and small carriers servicing regional markets and doing it very well. That’s always been the nature of our business.”
Family Operated Fleets
Jeff Noble of BOO provided an eye-popping portrait of Canadian family-operated fleets and how few of them are prepared for the challenges of passing on their businesses to the next generation or an independent party. Among his talking points:
- Demographics show that 75% of Canadian businesses are expected to change leadership in 1 to 2 car leases (representing 350,000 businesses over next 8 years)
- Approximately $1 trillion will change hands
- Over 90% of North-American businesses are family-controlled. They generate almost 60% of the GDP, employ about 60% of the workforce and create 70% of all new jobs
- 80% feel the family business has a definite impact on their family identity
- 84% would love to pass the baton to a family member
- Less than half have a succession plan and/or an identified successor
- Historically, 70% of families are unsuccessful in transitioning wealth, with 60% of failures being the result of a breakdown in trust and communication and 25% are attributed to inadequate preparation of heirs.
“To many people, succession implies retirement and retirement means to take something out of use – it means giving up control,” says Noble. “Some feel succession can lead to a loss of wealth or fear it will cause family conflict.”
Tilley says that a good family succession plan goes beyond preparing spreadsheets.
“It’s about a lot more than just a dollar transaction,” says Tilley. “It’s a long term process that starts years in advance. It’s not just about the business, it’s about the family. Before you do anything, you have to be able to lay everything out on the table honestly and openly and make sure it’s all going to fit.”
What Are You Going To Do The Next Day?
Peter Hodge, who successfully sold his fleet to Contrans, parted with a solid piece of advice for fleet owners thinking of passing on their businesses.
“One thing most people don’t ask themselves during the process is this: After the deal goes through, what are you going to do the very next day? You really have to be prepared for that.”
Even before the event concluded, attendees were asking about a sequel. OTA will update the industry in the coming months.