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Part One: Advice on selling your privately held logistics/transportation company

Follow @SamJermy Follow @SupplyChainD Many owners choose to sell their businesses rather than pass them on. Fortunately, this is an opportune time as ...

Freddie Pierce
|May 12|magazine8 min read

 

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.