A Letter by Andy Ahern: Why Transportation Companies are Selling

Not too long ago, I commented on the state of the economy, and truck acquisitions.  As a transportation consultant and advisory firm, I have experienced a tremendous amount of activity in both the trucking and freight logistics space.
 
I have also experienced numerous Sellers that go through the sales process, and then, at the last minute, change their mind;

• They weren’t mentally prepared to “let go”;

• Someone whispered in their ear, that their business was worth more than it was; and then

• After the fact, they recognized they made a very bad decision; too late!

Selling a business is a very emotional process, but it is a process that everyone has to be prepared to go through, at some point in their life.  The unfortunate part of this dilemma is that it is very difficult for many carriers to compete today.
 
I recently had one of my analysts do a review of 39 trucking lawsuits, and the results were staggering. 

• $38M settlement;

• $165M settlement;

• $25M settlement;

• $11M settlement;

• $281M settlement;

• $30M settlement;

• $3M settlement;

• $52M settlement and the list goes on and on.

For any of you who are interested, contact my office and I will forward you the actual links for your research.  When I reviewed these lawsuits and looked at the “rationale” behind the settlements, it made me sick to my stomach.
 
Safety, compliance, and the general perception of our industry, is having a devastating effect on trucking.  Trucking is Middle America.  Safety and Compliance, with the advent of CSA driver fitness citations, and CSA compliance, along with HOS standards have impacted our industry dramatically.
 
I listen to the experts discuss the driver shortage; we all understand the problem! But do we?

• We have an aging driver population; that is a given!

• We understand that the millennials are looking for other things, other than just money. However, what is compounding the effect of driver capacity is the”rules” themselves.  That’s what many don’t realize.

CSA Compliance is making it very difficult for many carriers’s to survive. Trucking owners start questioning whether continuing the business is worth the risk.
 
FMCSA keeps working to “appease the public”, but they are doing just the opposite.  FMCSA is focusing on tighter regulations, which means that many small to medium-sized trucking businesses will fail; the larger will become larger, and ultimately, the consumer is going to pay for the poor judgment of the politicians.
 
When you look at everything that is impacting our industry;

• Mandatory increases of  limits of coverage; will adversely impact many small to medium-sized carriers; more money for ambulance chasers.

• There is a bill pending to eliminate trucking companies from self-insuring; Who’s bright idea was that?

• The cost of technology and CSA compliance

• The cost of new equipment;

• The large impact of HOS revisions; and

• Large Plaintiff claims awards.

Think about this! If you are the next generation, do you want to have to deal with all these issues in your life? One claim, after years of hard work and you are out of business – not a “bright picture.”
 
I read an article; I believe it was in FleetOwner Magazine, that stated that millennials will make up a staggering 75% of the workforce by 2030.  For some of you who don't know what a millennial is, it is those born after 1980.  Why is a statistic like this important?  Because you need to understand the evolution of our industry, in order to make sure that trucks are always filled and you are in business.  Millennials look for different things than Baby Boomers do;

• Income is not always their top priority;

• They look for paths for advancement; they want to make a difference; they want the recognition that their opinions are important; they want their “Voice to Be Heard”, sound familiar?

The point, the future truckers thought processes are different than the previous truckers.  I am a father of 5 children.  My children range in age from 38 to 22, so I can tell you that my children want to know; they want to have a pivotal role in the growth of their future.  They are not afraid to question, challenge, and ask questions. 
 
There are things that the older generation can learn from millennials;

• Millennials place an emphasis on health and well-being; and

• They embrace technologically advanced.

So, what's the point to all my rhetoric?

• The evolution of Trucking, changes continually;

• Plaintiff lawsuits are on the rise;

• FMCSA Compliance will put many small to medium-sized carriers “up against the wall;”

• The mandate of additional technology and driver capacity will continue to be a very large issue for many truckers;

• The cost of equipment is becoming astronomical; and

• One lawsuit, for a trucking company that has been in business for 30 years can put them out of business.

What's wrong with this picture?
 
In closing, review the “links” my firm researched, and take the time to look at what the politicians are doing to our industry.  The rules on speed limiters, are expected to be out this summer.  Carrier limits are going to increase and when that happens it will impact carrier’s bottom line.
 
To complicate matters, the Federal Highway Funding is running low.  Yes, I am sure the lawmakers will approve funds this spring, but it won’t be quick enough to head off delays on many projects that states are eager to start on.  According to the Kiplinger Report, there are 440 projects worth more than $1.3 Billion that are already put on hold.  Taxes continue to go up, home owner’s costs continue to go up; as inflation starts to rise, as manufacturing starts to become stagnant, as driver capacity continues to get worse, and as tax incentives continue to disappear; more family businesses are getting fed up and want out. Do you blame them? I don’t! They want some liquidity in their life before it’s taken away.

Learn more about Ahern & Associates here.