LTL (less-than-truckload) carrier due diligence

Under a letter of intent, the question for the buyer of an LTL carrier is whether the documents support the price. The documents that tie the network together are the regulatory records, terminal leases, interline agreements and the claims files. Work through them in an order that surfaces a serious problem early, before legal and accounting costs build up.

Regulatory and safety records

Ask for the carrier’s safety fitness certificate and the equivalent records in every province where it operates. For Ontario, the CVOR abstract summarises a carrier’s safety performance, including collisions, convictions and inspections, and Ontario’s Level 2 abstract gives event detail for a five-year period. Ontario lists the Level 1 abstract as a public summary and the Level 2 record as for carriers only, so ask the seller to order the Level 2 record and share it with you. Compare those records with what the seller says. Ask about any facility audit, since the ministry says audit results and related convictions may affect an operator’s CVOR record. Confirm which entity holds each record. Transport Canada says regulations governing commercial vehicles, drivers and motor carriers in Canada are based on the National Safety Code standards, a code of minimum performance standards that applies to all persons responsible for the safe operation of commercial vehicles. Ask the seller which provincial authority holds each record, then ask each authority, or your lawyer, how to obtain a current copy rather than relying on a copy the seller supplies. List every province and territory where the carrier’s vehicles operate, and ask for the matching record from each.

Terminal leases and real estate

For each terminal, read the lease or title: remaining term, renewal options, assignment and change-of-control clauses, and any landlord consent needed. Search the registries your lawyer advises for liens or other claims. Ask your lawyer whether an environmental review of any owned site is warranted, and whether municipal zoning permits the current use. A lease that cannot be assigned or renewed on acceptable terms is a finding to raise before the price is settled.

Interline and shipper contracts

Request every interline agreement and read the assignment, termination and settlement terms. Then contact, with the seller’s agreement and under confidentiality, the partners whose lanes carry the earnings. If a partner declines to continue with a new owner, the lanes it handles would need replacing. Do the same for shipper rating agreements and accessorial schedules, and ask whether they would be reissued under a new entity.

Claims, damage and service

Request the claims file in full: open and closed claims, amounts paid, causes, and any shipper who reduced or stopped business after a dispute. Ask how claims are recorded. Your accountant can test whether reserves in the financial statements match the claims actually open.

• Safety records for every province of operation, matched against the entity named in the deal
• Every terminal lease and title, with assignment and renewal terms read in full
• Every interline agreement, with partner contact made under confidentiality
• The complete claims file and the shipper complaints behind it
• Maintenance records and age profiles for both the linehaul and city fleets

The fleets and the labour

Inspect both fleets, not only the tractors. Obtain maintenance records and an independent appraisal. For the dock and cross-dock workforce, ask your lawyer to check employment contracts and whether any employees are covered by a collective agreement, and how that would affect the transfer of staff. Our trucking due diligence guide covers the checks common to any carrier.

Insurance and loss history

Ask for the carrier’s insurance policies and the insurers’ loss histories for cargo, liability and auto coverage. Check what the policies cover, what each deductible is and whether any claim is still open. Ask your insurance adviser whether the same coverage can be arranged for the buyer’s entity and on what terms.

Corporate and tax records

Your lawyer should confirm who owns the operating company and each related entity, whether shares or assets are being bought, and whether any related companies own terminals, equipment or rights the carrier uses. Your accountant should check payroll remittances, fuel and sales tax filings and any open audits, so that the buyer is not inheriting liabilities it has not priced.

Findings to weigh, and what each means

A terminal that cannot be kept means part of the network disappears. A partner that will not continue means the lanes need replacing. A claims record that the buyer cannot accept means the service may cost more than it appears to. Two fleets needing replacement together mean extra capital. Each is a reason to consider a price change, a condition in the agreement or a decision to walk away, and the buyer should decide which before signing.