Corporate Leaders Offer Lesson on Acquisition Pitfalls

LAS VEGAS — Mergers and acquisitions are integral parts of the trucking landscape today, but are they right for your company?

That was the question addressed by the owners of two truckload carriers with different perspectives on the issue and John Terry, president of Transportation Management Investment Group of Philadelphia.

Don Schneider, president of Schneider National of Green Bay, Wis., has seen his $2.7 billion trucking and logistics company grown through internal expansion and, more recently, through acquisitions.

Robert Hansen, president of Robert Hansen Trucking in Delavan, Wis., runs a relatively small truckload carrier operating in the Northeast and Midwest. He tried and failed to complete his company’s first major acquisition last year.

Terry, an industry veteran who has been involved in about 75 acquisitions and divestitures, challenged the view that the industry is consolidating in part because bigger companies perform better than smaller ones.

“I don’t see a strong industry consolidation trend,” he said.

To test his hypothesis, Terry reviewed the performance of all motor carriers that reported earnings to the U.S. Department of Transportation over the past three years and found little difference in the overall profitability among big and small carriers.

Among the 100 largest trucking companies, publicly owned carriers grew faster than privately owned companies over the past seven years. However, very few of the publicly held operations have been rewarded with stock prices that match levels typically given to so-called growth stocks.

Terry said only three of 42 public companies he studied have stock trading at more than 15 times estimated 1999 earnings per share.

Low stock prices make it more difficult for publicly owned companies to use stock to make acquisitions.

Terry’s advice to fleets is to “pay attention to competition within your niche” rather than on overall market trends.

“The reality is, in most cases, a company is worth more to the company owning it rather than on the market being sold,” he said.

Hansen said the focus of any acquisition should be on raising profits.

Bigness isn’t greatness,” he said.

Growth can be fueled internally by doing business with existing customers and increasing equipment use.

“We have equipment available 24 hours a day and we are using it about 40% of the time,” Hansen said. “If you don’t get more utilization, then you have to get more trucks and drivers.”

For the full story, see the March 22 print edition of Transport Topics. Subscribe today.