Operations

3 Big Tips When Buying Or Merging Bus Companies

Posted on September 17, 2010 by Spencer Tenney

Page 1 of 3

Buying bus companies, or the assets of those companies (customer lists, revenues, vehicles, goodwill, etc.), can be an affordable and lucrative growth strategy for all transportation business owners. But many owners have limited experience and distrust the acquisition process. Many also have little confidence in their own ability to incorporate acquisitions into a business development strategy.

This article highlights three tips designed to expand the education and confidence of business owners and to help influence the success of their acquisition/merging efforts.

1. Don't Assume that Something is Wrong - As a Matter of Fact, Don't Assume Anything
It is common for prospective buyers to make bold assumptions about acquisitions before understanding the facts surrounding them. One of the most common assumptions is, "If the business is for sale, then something must be wrong with it."

Business owners sell their companies for many reasons: they're tired, they want to take advantage of all-time low capital gains tax before 2011, they would retire rather than reinvest in equipment and prolong their career, they experience health issues, they want a new lifestyle with fewer responsibilities, partner disputes, family issues, etc.

Experienced and educated business buyers know not to assume anything or rush to any judgment about a particular business for sale. They understand that every business has imperfections (cash flow, fleet usage, technology) - many of which they can convert into opportunities in the context of an acquisition.

Example: CTA recently sold a transportation business in Houston. The seller's business was breaking even each month. The financial performance was not exciting on a stand-alone basis. But the buyer was a local transportation business owner and recognized that once he absorbed the revenues, vehicles, and employees into his operation, the numbers would all change. Through the acquisition, the buyer created several hundred thousand dollars in gross profit and cash flow immediately.

Educated buyers also resist assuming that a business is not interested in selling or merging because of its size, history, or even from what they have heard directly out of a business owner's mouth. Because of the private nature of the bus industry, business owners are understandably cautious about "showing their hand" and especially cautious when it comes to sharing financials with competitors.

The reality is that many transportation businesses could be and should be considering all acquisition and merger possibilities with regional/national competitors - as demonstrated through the recent merger between United and Continental Airlines. A professional intermediary can help business owners initiate and engage into intensely private acquisition/merger discussions while protecting each company's confidentiality - something difficult and risky for business owners to do on their own.

Another assumption to resist is that only large companies engage in mergers and acquisitions. Small companies with limited financial resources regularly protect retirement funds and transform their quality of life through mergers and acquisitions. Do not limit your options through your own understanding. Many deals of all sizes can be funded with little upfront cash. 

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