According to Mergermarket, an M&A research group, U.S. business mergers and acquisitions hit a high mark in 2011 that hadn’t been seen since 2007. If you’re the owner of a small transportation business, you may envision consolidation as similar to a large company swooping down like a vulture to eat up weak competitors. By contrast, consolidation can actually provide strategic opportunities for companies of all shapes and sizes. If your transportation business initiates an acquisition or merger, increased market share and customer base could pave your way to greater profits. On the flip side of the transaction, the owner of the transportation business for sale can reclaim some lost value and watch their company take off, again.
Insulation Against Economic Hardship
As the U.S. economy endured a recession, transportation businesses experienced a slump, just like many other industries. The chauffer business particularly suffered, with limo customers cutting costs. Of course, the larger companies were able to weather these tumultuous times more easily than their smaller peers because they were better equipped to absorb the temporary losses. When even mom-and-pop operators join forces with another chauffer business, expenses become streamlined, and overhead is reduced. The results of such a consolidation can promote success during the good times and survival during economic hardships.
Increased Long-Term Customer Base
Unlike those businesses aiming for organic growth, those that grow through consolidation benefit by having an increased customer base. Creating new customers can be an expensive and time-consuming process, while buying them can bring immediate gratification. By teaming up with another transportation business, you benefit from the marketing they’ve already done and trust they’ve already built. You can leverage their good reputation as well as their prices to benefit your business as a whole. Often, companies attempt organic growth by hooking customers with exceptionally low prices, hoping that the short-term losses will bring long-term gains. When you purchase an already established business, the customers you’ll gain will be already accustomed to paying decent prices, something that you’ll be happy to continue.
Resources Poised for Growth
If your transportation squeaks by, from month to month, on a slim profit margin, you may feel like you lack the resources you need to promote growth. Of course, making cuts can only go so far, and if you make too many cuts, you have no more to make. By merging with another transportation business for sale, you can access the kind of growth that’s otherwise out of reach. Today’s market has increased potential for seller financing, allowing for strategic expansion through acquisitions and mergers to be affordable even for the smallest companies.
Would it be a better move for you to list your transportation business for sale, or to go for growth through a merger or acquisition? At The Tenney Group, our professional transportation business brokers can help you determine the best strategy for you.