Selling a freight forwarder in Canada

An owner who has decided to sell a freight forwarder is selling a set of relationships and a way of moving freight, not a fleet. That sets the work. Buyers may test whether the margin is repeatable, so the records come first. Client and shipment information is sensitive, so confidentiality matters before anyone opens a file. And any accreditation, carrier agreement or customs arrangement the business relies on has to be checked early, because it can decide timing. The general sequence is covered in the business sale process end to end. What follows is specific to a forwarder.

Get the records in order first

BDC lists an accountant’s role as preparing year-end and interim statements, projections and the documents buyers ask for in due diligence, and a lawyer’s role as supplying information and negotiating the purchase agreement. For a forwarder, add margin by client and lane, claims history and the customs files. The CRA’s records page describes what records the law requires businesses to keep, including what GST/HST registrants and employers must keep. Ask your accountant whether yours would hold up, and look for gaps yourself before a buyer’s accountant does. Keep a dated list of what you have shared and with whom. If the deal does not proceed, the section 7.2 conditions under PIPEDA include an agreement requiring the organization that received personal information to return or destroy it within a reasonable time, and you will need that list to follow it up.

Protect client information while buyers look

A forwarder’s files name shippers, consignees and contacts. Where they include personal information, section 7.2 of PIPEDA addresses what organizations that are parties to a prospective business transaction may do with it without the individual’s knowledge or consent, in addition to the other consent exceptions in the Act. Among its conditions is an agreement requiring the organization that receives the information to use and disclose it solely for purposes related to the transaction, to protect it with appropriate safeguards, and, if the deal does not proceed, to return or destroy it within a reasonable time. Have counsel build that into the confidentiality agreement, and show buyers summaries before detail.

Check what the business must keep or notify

Freight forwarding may involve several regimes at once, and which ones apply depends on what the business does. Ask whether it holds an airline cargo agent accreditation, whether it registers with a foreign regulator for any U.S.-bound ocean activity, and whether it owns or relies on a customs brokerage. For each one, ask the body concerned what a change of ownership requires and how long it takes. CBSA’s importing guide describes registering in its CARM system and making declarations, so confirm who holds the accounts and authorizations the business uses for clients and whether they transfer or must be reissued.

Think about who the buyer is

If a larger forwarder or logistics group is the likely buyer, competition law can matter even for a modest deal. The Competition Bureau says the Commissioner may review any merger or acquisition regardless of size, and that whether a transaction is notifiable depends on financial thresholds related to the size of the parties and the transaction, with those thresholds, other criteria and certain exceptions set out in the Competition Act. Ask your lawyer early whether a buyer’s size raises the question. BDC also notes that buyers may insist on a reduced price if the seller cuts all ties, so decide what transition role you are willing to take before you negotiate. Ask each interested buyer what it needs from you after closing, and compare those answers before you accept any structure.

Sequence the sale

Settle the order before anyone outside the business hears about it. Tidy the records and margin reports. Sign confidentiality agreements. Resolve the questions about accreditations, registrations and customs ties. Then agree with your lawyer what clients and carriers will be told, by whom and when, and what the agreement says if a counterparty must consent. When and how clients and carriers are told is a judgment to make with your lawyer. BDC also names a banker among the advisors, one who can provide funds for vendor financing and give strategic advice.

Keep the team and the client files steady

The people who hold client and carrier relationships may be the continuity a buyer is paying for. Decide early who needs to know, and ask your lawyer what the deal structure means for their employment and for any written confidentiality or non-solicitation terms they have signed. The guide on what happens to employees when you sell covers the general position. Also ask each key person what would make them stay through the handover, because their answers will shape what you can promise a buyer.

• Margin reports by client and trade lane, with the carrier and airline agreements and any change-of-ownership clauses.
• A confidentiality agreement covering client names, rates and any personal information, signed before any file is shared.
• A written list of accreditations, registrations and customs arrangements, with the body to contact about each.
• The status of open claims and any CBSA corrections or adjustments notices that remain unresolved.
• A transition plan that names who introduces the buyer to each key client and carrier.