Selling a freight brokerage in Canada

An owner selling a freight brokerage should ask whether the business is made of relationships and know-how that sit in a few heads, since those need to be on paper before anyone can test them. The work before going to market is therefore less about polishing the company and more about turning what the owner knows into records, procedures and introductions that someone else can use. This guide covers the sequence: the records to prepare, how to make relationships transferable, what a regulator may need if the company also hauls freight itself, how to keep the sale confidential and what a buyer will ask for once talks begin.

Start with the records a buyer will test

BDC says buyers will ask to look at historic and interim financial statements, projections, tax returns and other records, and advises sellers to review them with their accountant so interim statements are accurate and projections realistic. For a brokerage, add records the statements do not show: the freight billed and the spread kept on each load, grouped by shipper and by lane, and a file for each carrier used. If the books mix the brokerage with other activities, separate them now. The guide on cleaning up financial records covers the general steps.

Make the relationships transferable

BDC also advises sellers to document and update standard operating procedures so operations are easier to transfer to a new owner. In a brokerage that means writing down how loads are quoted, how carriers are chosen and onboarded, how claims are handled and who has authority over credit terms. It also means putting other people in front of the large shippers and core carriers well before a sale. BDC warns that buyers may insist on a reduced price if the seller cuts all ties, and that a full cash-out leaves the buyer carrying more risk. Decide how long you can stay, and what you would do in that period, before you speak to a buyer.

If the company also runs trucks

The sources registered for this page cover carriers, not brokerage activity as such. Ask a lawyer and the transport authority in each province you operate in whether anything beyond ordinary corporate and tax filings applies to the brokerage itself. If the company also operates trucks, the carrier side has its own rules. Transport Canada says provincial and territorial regulations govern the truck industry, except the rules it sets for federally regulated extra-provincial carriers. Under the Motor Vehicle Transport Act, s.7(1), and subject to the regulations, no person or body may operate an extra-provincial motor carrier undertaking except under a safety fitness certificate issued by a provincial authority or an analogous document prescribed by the regulations. In Ontario, a CVOR holder must tell the Ministry of Transportation immediately about changes such as names, addresses, fleet data and changes in corporate officers. Ask the authority how a change of ownership is handled before you promise a buyer a closing date.

Keep the sale confidential

BDC cautions that, depending on a listing site’s confidentiality procedures, word could get out to employees, customers or suppliers that you are selling. Consider how a shipper or carrier would react if it heard early, and decide who is told, and when. Use a written confidentiality agreement and release information in stages. Personal information needs care as well. PIPEDA s.7.2, in addition to s.7(2) and (3), lets organizations that are parties to a prospective business transaction use and disclose personal information without the individual’s knowledge or consent if conditions are met. They include an agreement that requires the recipient to use and disclose it solely for purposes related to the transaction and to protect it by security safeguards appropriate to its sensitivity. Under s.7.2(4), this does not apply where the transaction’s primary purpose or result is the purchase, sale or other acquisition or disposition, or lease, of personal information. The answer on sharing information with a buyer’s lender or advisers covers that side.

Sequence the sale

A workable order is records first, then people, then the market. Put the statements and load-level reports in order with your accountant. Introduce the team to the main shippers and carriers. Settle how long you will stay and what the buyer will own, including the transportation management system and its data. Only then approach buyers, with a confidentiality agreement signed before anything identifying is shared. Keep a lawyer involved from the start, since BDC notes that you will need one familiar with business transitions to supply information during due diligence and negotiate the purchase agreement.

What the buyer will ask for

• Freight billed and spread kept by shipper, lane and month, reconciled to the financial statements
• A file for each carrier used, showing the current insurance certificate and its safety record or certificate
• Shipper agreements, with credit terms and any wording about change of ownership or termination
• A list of cargo claims and disputes, open and closed, and how each was resolved
• Who owns the transportation management system and its data, and whether it can be transferred

Having these ready before the first conversation lets a buyer check the numbers.