Buying a freight brokerage in Canada

A freight brokerage owns few trucks, so useful questions include who really holds the shipper accounts, how reliable the carrier network is, and what you personally need before you can take over. This guide sets out what to qualify for first, what to look for on closer inspection, what a seller may leave unsaid, how to screen carriers using public records, and when a transaction has to be notified to the Competition Bureau. It is a buyer’s checklist, not a view on whether to proceed with any deal.

Work out what you must qualify for

The sources registered for this page do not show a licence for brokering freight itself, so ask a lawyer and the transport authority in each province the brokerage operates in what applies. If the target also runs trucks, the position is different. Under the Motor Vehicle Transport Act, s.8(1), and subject to the regulations, a provincial authority may issue a safety fitness certificate to a person or body to operate an extra-provincial motor carrier undertaking, and may revoke it. A buyer should not assume a certificate carries over to a new owner. Ask the authority. Also ask your insurer and the brokerage’s largest shippers whether they have onboarding or approval requirements for a new owner.

What to look for up close

Look for evidence, not description. Is the kept spread spread across many shippers and lanes, or does one account carry it? Are carrier relationships held by several staff or by the owner alone? Are carriers checked and documented before they are used? Is the transportation management system owned by the business, with its data exportable? A brokerage with good answers on paper can still depend on one person’s phone, so ask who else could run each large account on the first day. The page on what a freight brokerage is worth explains how those answers affect price.

What the seller may not volunteer

Ask directly which large shippers have reduced volume or left in the past period and why, which lanes have lost margin, whether any carriers are owed money or are slow to be paid, what cargo claims have been made and how they ended, and whether any shipper has threatened to contract carriers directly. Ask to see the correspondence on the larger disputes, and ask the seller to explain any gap between what was said and what the documents show. A seller who answers readily and with documents is giving you better information than the summary alone.

Screen the carrier network yourself

Public records let you check the network without relying on the seller. Ontario offers online carrier records including a carrier safety rating enquiry, a carrier search by name and a list of unsatisfactory or cancelled carriers, and sells abstracts that summarize a carrier’s collisions, convictions and inspections. Ontario states that an Unsatisfactory rating will cause operating privileges to be suspended or cancelled throughout Canada. Under s.7(1) of the Motor Vehicle Transport Act, and subject to the regulations, an extra-provincial motor carrier undertaking may operate only under a safety fitness certificate issued by a provincial authority or an analogous document prescribed by the regulations, and under s.8(2) of the Motor Vehicle Transport Act that certificate is valid throughout Canada. For carriers based in other provinces, ask the authority there what its records show. Run the seller’s carrier list against the records you can reach.

Meet the people and see the system

If the staff hold the relationships, ask the seller for permission to meet the people who will stay, before closing and under the confidentiality agreement. Ask each of them what they handle, which accounts they would call first in a crisis and what they expect to change under new ownership. Then ask for a working demonstration of the transportation management system. See how a load is quoted, tendered, tracked and invoiced, how carrier compliance documents are stored, and what a report on the kept spread by shipper looks like. Ask how that report is produced and whether it reconciles to the financial statements.

Check whether the deal is notifiable

The Competition Bureau says Part IX of the Competition Act requires parties to notify it of certain transactions when they are of a specified type, exceed certain thresholds and are not exempt. A buyer that is itself a larger brokerage or logistics business should ask a lawyer early whether the transaction meets those tests. Price terms matter too. BDC says that you and the seller must agree on a purchase price before applying for its financing, and asks for that price and how it was determined, so settle the structure before you apply. The guide on financing a freight brokerage covers that next step.

• Confirm with a lawyer and the relevant transport authorities what you must hold or register to operate
• Ask who other than the owner could run each large shipper account
• Run every carrier the brokerage uses against the public safety records
• Ask for lost-shipper, claims and carrier-payment history in writing
• Ask a lawyer whether the transaction is notifiable under the Competition Act