Reaching out to experts on trucking and hauling business
July 26, 2024
by an investor in Florida, USA
Looking at a business that has about 70 trucks
Seems the industry is going through a big recession
Someone much smarter than me told me generalized freight of any type (flatbed/dry van/reefer/bulk) is a commodity, but specialized forms of transport can be interesting (oversize, hazmat, pharma cold chain, etc.)
Half of this fleet is flatbed (so generalized), other half includes dump trucks, water trucks, low-beds used for heavy hauling, end-dumps
They claim the truck fleet is worth $15m - have an appraisal to show
Rough numbers: 2021/22/23/24 annualized: Revenue - 11m, 12m, 11.5m, 6m (yes, down 40% on an annualized basis) Op income - 1.4M/1M/1.7M/0.1M
4 questions ( address a subset if you prefer)
- Would you buy this?
- If so, what would you pay?
- How much of the payment would you defer via Seller Note or Earnout?
- any big questions you will ask the seller early in the process?
from The University of Chicago in Nashville, TN, USA
1. This is more favorable mix of transportation types, which makes me more cautious about the drop, especially because the freight recession is a year in already. They likely lost a big customer earlier this year, definitely probe there.
2. Be very careful with their appraisal. Used equipment was extremely valuable a couple years ago but has dropped dramatically in the last year during the freight recession. One way to spot check the value would be to go on a site like Ritch Bros and check listings for similar models, look for closed listings. Average value of $214K / unit sounds high if it is heavily used equipment but it is hard to say since they may have a lot of trailing units or new tractors that they bought during the boom.
3. Use BVR to sanity check the valuations but if their equipment is actually valued at $15M then I their liquidation value is likely worth far more than the company. If they have under utilization there may be equipment that can be sold off.
The general perception is that we are at the bottom of the market for freight but it is a very risky industry because of the fixed costs. I read freightwaves every day out of interest in the industry and it is tough to go a week without hearing about another bankruptcy. Feel free to reach out if you would like to discuss.
from University of Texas at Austin in Austin, TX, USA
For a purchase - it depends on your investment thesis. Trucking is generally very capex heavy, can be cyclical - and the customer mix is really important. Are there direct relationships or picking up brokered, and so on.