Merging Transportation Companies: A Solution for Struggling Competitors?
Sales down? Vehicle utilization disappearing? Sound like your company? When times get tough, the competition often gets tougher. In some cases merging with a competitor is a better solution than continuing to fight against them. Is merging right for you? Read on…
Why do companies merge? In many cases, companies merge to enhance each others strengths and reduce the effect of each other’s weaknesses. In the process of making two entities one, they reduce overhead, create efficiencies, and maximize profits.
Mergers can be a highly effective strategy during times of economic crisis. Many factors have to fall into place in order for this to happen. Two that I believe are crucial are a) uniting similar office cultures and b) matching strengths and weaknesses that are complimentary to each other.
If you are considering merging with a competitor, it is crucial that you and your competitor share similar business philosophies and similar office cultures. Even when the numbers make sense and the owners like each other, combining company cultures that share different values is the most proven recipe for a merger disaster. Do not take a chance on this. The risks are far too great. Don’t waste your time evaluating the possibility of a merger until you know that a merging candidate has an office culture compatible to yours.
Secondly, if you are considering merging, you have to be able to bring complimentary value to the table in order for a merger to make sense for each business.
Mergers are not unlike marriages. When searching for a life partner, you try to find a person that compliments who you are—the good and bad. If a husband and wife were exactly the same, what value would they bring to each other’s life?
When looking for a candidate to merge with, the same is true. You identify your strengths and weaknesses as well as the strengths and weaknesses of your competitors and try to find a match that gives you advantages you wouldn’t otherwise have.
Exercise: Identifying Merging Candidates
Make a list of your company’s strengths and weaknesses and try to find complimentary qualities with those of possible merging candidates.
Example:
My Company’s Strengths:
High Level Management Expertise
Great Equipment
Systems & Internal Processes
Capital
My Company’s Weaknesses:
Sales Talent
Technology
Merging Candidate’s Strengths:
Top Notch Sales & Customer Service Talent
Effective Technology & Internet Marketing Personnel
When you write out your company’s and your merging candidate’s strengths and weaknesses, you can evaluate how well a competitor may compliment your existing company. If the opportunity for strong synergies exists (and you have already established you have compatible office cultures), merging could be a strategy worth putting into action.
Take note. Merging companies is often much more complex than a standard business purchase. In almost all cases it is critical to have an unbiased third party facilitate the transaction. Using a third party intermediary creates much needed objectivity and distance between the two owners during the negotiating process. An intermediary makes negotiating less personal for the owners. This is crucial considering they will be working with each every daily once the deal is final.
If you are in the process of or considering merging with a competitor, Charles Tenney & Associates is here for you. Please submit the contact form below for a no obligation free consultation from a CTA consultant.
