According to a survey published in November 2017 by Ti, a UK-based research consultancy, around 60% of respondents expect ‘significant’ levels of mergers and acquisition (“M&A”) activity in European road freight over the next five years. The same consultancy predicts that the European market which grew by 2.4 percent in real terms in 2016, will continue to do so but at a real compound rate of 3 percent through to 2020. This continuing market growth makes it a good time to acquire other fleets and capitalise on increased business opportunities. (source: JOC) Is your road transport company ready for M&A?
An active European M&A market
The forecasts are starting to come true. In November, leading ferry operator and logistics company DFDS announced that it is to acquire the Dutch company Alphatrans Group BV, a specialist in transporting oversize and heavy cargoes. (source: WorldCargo News) In addition, major US player XPO Logistics, having already bought France’s Norbert Dentressangle for $3.5 billion in 2015, is reported to be on the lookout for European acquisition targets. The same goes for DSV, an ambitious Danish trucking, and freight forwarding company, which is thought to be allocating up to $2 billion for the right deal. (source: JOC)
Synergies for road transport company M&A
In the case of a road transport company, the management needs to ask themselves strategic questions about their target and the possible synergies of combining both companies including:
- To what extent the cargo flows of both companies match and how can we take advantage going forward?
- How can we ensure fleet standardisation?
- How can we use this transaction to increase the quality of the whole fleet?
- How will the transaction help us reduce the total cost of ownership of our fleet?
- How will we adjust our operations to ensure optimal use of the new economies of scale brought by the deal?
Keys to M&A success
If your company is considering an acquisition or merger, what are the keys to M&A success? A well-executed post-M&A integration strategy is vital for value creation. Inspired by advice from large consulting firms such as Bain and individual M&A advisers such as Toby Tester, here are the main success factors:
- Be clear about the objectives of your deal in strategic, financial and operational terms and how the transaction will add value to your business.
- Select a core group of internal leaders to build a comprehensive integration plan with defined measurements of success.
- Address the people and management issues quickly. Move quickly to select the top people from both organisations to execute the new vision for the combined company. This maximises your chances of retaining the best employees and customers and getting on with the integration.
- Progress with one culture only. Bain recommends that companies select one corporate culture, its way of doing things, usually the acquirers. Retaining two cultures causes friction, slows down the integration and destroys value.
- Communicate clearly, regularly and honestly. Obtain the buy-in for the transaction from people in both organisations as many will be nervous about their roles in the new set-up.
- Don’t forget the day job! The process of integration can be a distraction. The two companies should not forget the day-to-day running of their core businesses whilst the integration takes place.
TIP and M&A
TIP Trailer Services can support road transport companies going through the M&A process in several practical ways:
Outsourcing trailer maintenance to one company
One way of increasing the benefits of your M&A transactions is to outsource preventative trailer maintenance. Outsourcing is more cost-effective than keeping it in-house. You do not have to carry the fixed overheads of technicians or the latest diagnostic and repair equipment. This flexibility includes the 24/7 availability of maintenance and repair support through a pan-European network of workshops. Trailer downtime is minimised.
A well-designed and established outsourced trailer maintenance partnership with a market leader such as TIP will free up more time for your fleet manager(s) to dedicate to more business-critical activities like customer service or business development.
Selling used trailer assets
If you discover that your fleet includes too many or the wrong sort of trailers after an M&A transaction, we can sell them for you. Our excellent reputation as experts in trailers, gained over 50 years in the business, coupled with our extensive European network enables us to sell over 7,000 used trailer assets per year. We sell a whole range of used trailers including curtainsiders, vans, flatbeds, and reefers as well as trucks.
Trailer telematics and data systems
One way of boosting the business performance of your trailer fleet post-M&A is through trailer telematics. Trailer telematics gives fleet managers real-time access to a wide range of data about their fleets, enabling them to take business-critical decisions more easily. Trailer telematics covers many areas including driver and trailer scheduling, finding the most effective delivery routes, asset tracking, monitoring wear and tear on mechanical components and remote control of functions such as reefer temperatures or tyre pressures.
TIP can install trailer telematics, integrate it with your existing fleet management software and help you manage it.
TIP is also expert in fleet management. Managers can use our web-browser based software to monitor and control a wide range of fleet management operations. These include a fleet overview, service related documentation, compliance data, roadside assistance reports, accounting documents, trailer reservations and an interface with telematics. Where appropriate, these functions are linked to key performance indicators. TIP can help install and manage this fleet management software. In a post M&A environment, TIP can also assist you with the merging and integration of different fleet management data systems.
To find out how TIP Trailer Services can help you in an M&A transaction, please contact us using this form.