Equipment hauling company due diligence

Once a letter of intent is signed, the job is to confirm, from independent records, the things the seller has said, and to find what the seller has not said. For a heavy-haul carrier, several records come from outside the company: the regulator’s carrier record, the security registry, the permit offices and the inspection stations. This guide lists which documents to request, which searches to run, and which findings can end a deal. The terms of the letter of intent set the window you have to do it in.

The carrier record from the regulator

Do not rely on a copy the seller hands over. In Ontario, a Level 1 abstract is a public summary of a carrier’s record for a two-year period, and a Level 2 abstract gives detailed event data for collisions, convictions and inspections for a five-year period; Level 2 is for carriers only, so ask the seller to order it or to give you access. Ontario also says a carrier can review its record online for free. Read the safety rating and the history behind it. An “Unsatisfactory” rating suspends or cancels operating privileges throughout Canada, so find out the current rating before anything else.

Security registrations against every unit

Trailers and tractors may be collateral for the company’s existing debt, and a lender or lessor may have a registered claim over a unit you think you are buying. Ontario’s Personal Property Security Act provides for a search of the individual debtor name, business debtor name or motor vehicle identification number index, and a certificate stating whether a financing statement or financing change statement is registered, and whether a claim for lien under the Repair and Storage Liens Act is registered. For other provinces, ask your lawyer which registry applies and search there for each place the company or the equipment is based. Match every registered claim to a payout statement. The glossary entry on PPSA registration gives the general idea.

Inspection and registration status unit by unit

Build a schedule of every tractor and trailer with its serial number, plate, registered owner and inspection status. In Alberta, the Vehicle Inspection Regulation requires commercial vehicles to have a valid inspection certificate and decal, and the driver must be able to produce the certificate on the request of an investigator or peace officer. Ontario says a vehicle not registered in the same name as the CVOR certificate needs documents linking it to the certificate. Anything on the schedule that does not match the seller’s fleet list is a question to resolve before closing. A unit that cannot be shown to be owned by the company cannot be priced as the company’s.

Permit, routing and escort files

Ask for a sample of completed permit files across the past year, covering each province the company works in. You want to see who applied, how the route was chosen, whether any permit conditions were breached, and how escorts were arranged and paid. Transport Canada says provincial and territorial regulations govern the commercial truck industry apart from federal extra-provincial rules, so ask which offices and paperwork apply in each province. If the files show the process only works when one named person is involved, record that as a finding, not a detail.

Incident, claims and audit history

Request every incident report, insurance claim and regulator contact in the period you are covering. Ontario describes facility audits as a formal intervention that reviews safety and compliance, and says violations found by the inspector may lead to charges against the operator, a driver, or both. Ask whether any audit has taken place, what it found and how the company responded. An incident involving an oversize load deserves its own read: what happened, who was responsible, whether the permit conditions were met, and whether anything has changed since. Ask the seller to walk you through it, then compare the account with the paperwork.

Findings that can change or end a deal

Ontario says an “Unsatisfactory” rating will cause operating privileges to be suspended or cancelled throughout Canada, so it is a reason to reconsider the price or the deal; ask your lawyer what any open charges mean. An unexplained registered claim over a trailer is something to have the seller resolve before closing. Permit knowledge held only by the seller is a reason to ask for a transition plan as a closing condition. A fleet that does not fit the work you want to keep is a reason to ask what the units would resell for. Customer relationships that prove personal to the owner are a reason to ask whether the revenue should be repriced, which is the point of key-person risk.

• The Level 2 carrier record, the safety rating and any audit reports
• PPSA search certificates for the company and for each vehicle identification number, with payout statements
• A unit-by-unit schedule of ownership, plates, serial numbers and inspection certificates
• A year of completed permit files and the escort arrangements behind them
• Incident reports, insurance claims and any regulator correspondence