Our director Dru Morgan recently caught up with Melbourne Business Broker Trevor Wantenaar to discuss best practices when selling a Freight Forwarding business in Australia.
Some key insights from their conversation are listed below:
Sale Price Maximisation – Customer Concentration
Trevor noted that across his freight forwarding deals, the businesses who achieved the highest sales price multiple were not overly dependent on any one client. Rather their customer base was broad and diverse, with no one client responsible for more than 20% of sales. This decreases the risk for prospective buyers, driving the price up.
Sale Price Maximisation – Freight Lane Concentration
While customer concentration is an important consideration for buyers, so is freight lane concentration. If the vast majority of work is coming from one freight lane, buyers can consider this to be too risky to buy. Ideally businesses that come to market will be diversified across different transportation types and locations.
Deal Structure – Management Team
In a recent transaction, the departing owner stayed on for an extended period after the settlement to help manage the transition to the new owners. This is a common deal structure when the owner is the key person in the business. Businesses that come to market with an established management team are more attractive to buyers and typically don’t involve an extended handover with the departing seller.
Following the boom in freight forwarding sales during COVID, a number of companies came to market to cash in. Prices have cooled since then, starting to become more representative of today’s market. Buyer demand remains strong, particularly for smaller sized businesses. The typical buyer being a larger industry player looking to achieve economies of scale.
Important Consideration – Systems Used
With the majority of acquirers being industry buyers, a key consideration is what systems the seller is using. For example, if the seller uses TradeWindow this may be a big enough hurdle to turn acquirers who use CargoWise from the deal. The difficulty to integrate the two organisations being too much.
If you own a freight forwarding company and would be interested in having a chat about your business, please don’t hesitate to book a complementary consultation with our team.