In recent months at Groves & Partners, we have received heightened interest from clients considering both acquiring and selling transport and logistics companies. As part of this we have had a number of strategy discussions with shareholders of transport and logistics companies regarding what they can do to increase the value of their companies prior to sale.
As a result of these discussions, we have prepared this article which provides 3 simple steps that will likely lead to higher sale prices and better sale outcomes when selling transport and logistics businesses.
1. Have an Up-To-Date and Well Maintained Fleet
Transport and logistics businesses generally have significant assets holdings. In our experience, companies with late model assets and strong maintenance records achieve better sale outcomes than companies with old assets and poor maintenance histories.
There are a number of reasons why companies with modern, well maintained fleets achieve better sale outcomes:
(a) There is less requirement for immediate capital expenditure following the sale of the business, meaning that the likely cash flow profits of the business post-purchase will be higher than what they would be if the acquirer needed to invest in capital expenditure immediately following their acquisition;
(b) There is a reduced risk of unforeseen and expensive breakdown maintenance which can often occur when fleets are poorly maintained, meaning the acquirer can have confidence that the fleet and equipment will perform well and confidence that there will be minimal unexpected maintenance costs post purchase, and;
(c) Late model equipment and vehicles often hold stronger valuations, thus leading to better sale prices for the business as a whole.
2. Negotiate Contracts with Your Major Customers
It is typical for many transport and logistics businesses to not hold written contracts with major customers. This typically occurs due to the reluctance of customers to agree to written terms regarding the way in which they do business with you. Further, this can happen when customers have been using the services of a business for a long time, and thus, new contracts have not been put in place because there is comfort regarding the service offering and associated costs.
In our experience, written customer contracts do make a major difference to transport and logistic company valuations and sale terms. This normally occurs as contracts provide more comfort to the acquirer regarding the reliability of future revenues and also provide guidance on agreed steps that may need to be taken to, for example, transfer the contract from the incumbent company to their acquirer.
3. Differentiate Your Service Offering
Transport and logistics companies with a specific niche or service differential are often better placed to secure higher valuations at sale and better transaction terms.
A service differential may be that your company has expertise in a particular type of transport, or a focus in a particular geographic region.
Service differentials improve transaction outcomes, as they often mean that acquirers will find it easier to buy-out a company with a service differential as opposed to attempting to compete with them.
Find Out More
Groves & Partners are expert business transaction advisors and valuers, with significant experience in selling transport and logistics companies.
If you are considering selling your transport and logistics business and would like to know more about how we can work with you, contact us on 1300 892 717 (+61 2 7208 7970) or email firstname.lastname@example.org.