Selling a Road Transport Business: What you need to know
Unique road transport industry
The road transport industry dominates the Australian freight market, providing services to businesses spanning the entire economy. In many ways, the success of the road transport industry is indicative of the success of the entire Australian economy, as businesses tend to hold lower stock holdings during periods of economic uncertainty or decline, having a direct, initial impact on road transport businesses.
Road transport businesses are quite unique, and the approach to selling these businesses needs to be tailored accordingly. Below we discuss some of the key factors that should be considered by owners of road transport businesses that are considering selling.
The Size of the Business
Larger road transport businesses are generally disproportionately valued in the market compared to their smaller counterparts. Why is this?
Often, larger businesses in the road transport industry are sought after by publicly-listed or private-equity backed industry buyers, who are often willing to pay a premium to secure well established, large road transport companies.
Many times, those publicly-listed or private equity backed road transport companies don’t demonstrate the same level of interest in acquiring smaller road transport companies as they do not offer the larger entity sufficient strategic benefits and economies of scale to warrant completing an acquisition.
The Strength of Customer Relationships
The strength of customer relationships held by a road transport business will strongly impact on its saleability and sale value. Road transport businesses that hold strong customer relationships, have a proven ability to hold onto customers in the long-term are often viewed as being of greater value in the market.
These customer relationships may be defined in contract form, or they may take the form of long-term custom based on a handshake agreement.
Differentiation of Service Offering
Those road transport businesses that provide a differentiated service offering to their customers are well placed to secure optimum sale outcomes.
A differentiated service offering may take the form of a geographic specialisation (for example, providing specialist service to the Newcastle and Hunter Region), or the provision of a niche service offering to customers (for example, specialising in frozen food transportation).
By having a differentiated service offering, barriers to entry inevitably exist to those who wish to enter your niche market, meaning the acquisition of your business may become a more economical way to enter your specialist market place.
Quality and Maintenance of Fleet
Given the nature of road transport businesses, it’s no surprise that the value of physical assets held by businesses in this industry (especially the fleet value), generally contribute heavily to the value of the business being sold.
On this basis, business buyers are often wary of those businesses that operate old or poorly maintained vehicles.
Personal Goodwill of Directors and Shareholders
How integral are the Directors and Shareholders of your business to its success?
‘Owner-operator’ businesses where one or two working proprietors hold a significant amount of non-transferrable knowledge are generally difficult to sell in the marketplace, meaning their values are normally discounted.
On the other hand, businesses with a strong management structure in place, and proven systems and procedures are often easier to transact in the marketplace, and generally attract a premium among business buyers demonstrating a positive impact to business values.
Find Out More
Quinn M&A have significant experience and expertise in selling road transport businesses. Call Quinn M&A on +612 9223 9166 or submit an Express Enquiry to arrange a confidential no cost consultation with one of our Directors.