Selling a LTL (less-than-truckload) carrier in Canada

An owner who has decided to sell an LTL carrier is selling a network, and a network depends on agreements with other people: landlords, partner carriers and shippers. Much of the preparation is finding out which of those agreements a buyer can step into and which need someone else’s consent. Start that work before a buyer is at the table. The order below starts with the facts that shape the structure of the deal, then the consents, then the information a buyer will ask for.

Decide what is being sold, and by whom

Under s.8(1) of the Motor Vehicle Transport Act, the provincial authority may, subject to the regulations, issue a safety fitness certificate to a person or body, so it is held by the operating entity rather than the trucks. Under s.7(1) of the Motor Vehicle Transport Act, 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, the CVOR program reviews business ownership structure among the information it considers. So the first decision is whether the buyer takes the company or buys assets and starts a record of its own. Ask your lawyer and accountant how each route affects your tax outcome and which approvals it triggers. Our guide to trucking authority and safety transfers covers the mechanics.

Terminal leases first

Read every terminal lease before a buyer does. Check the remaining term, the renewal options, what the landlord’s consent is needed for, and whether a sale of shares counts as a change of control under the lease. A lease that cannot be assigned or renewed on acceptable terms is a problem to know about before a buyer finds it, so ask your lawyer when to raise it with the landlord. If a landlord’s consent is needed, ask your lawyer how to approach it without disclosing the sale more widely than you must.

Interline partners and shipper agreements

Interline agreements are contracts with other carriers. Find out whether each can be assigned, what consent is required and whether the partner has a right to end it. Do the same for shipper rating agreements and accessorial schedules, which may need to be reissued or re-signed with a different operating entity if the deal is structured as an asset sale. Work out who at each partner and shipper will need to be told, when, and by whom, before any announcement is made.

Keeping the sale confidential

BDC’s guidance on selling a business says that, depending on a listing site’s confidentiality procedures, word could get out to employees, customers or suppliers that you are selling, and that potential acquirers could include competitors. It also says buyers will ask to look at historic and interim financial statements, projections and tax returns. In a carrier, material such as shipper pricing, claims history and driver and dock staffing may be sensitive. Ask your lawyer about a confidentiality agreement and about releasing material in stages, and decide in advance what a competing carrier would and would not see.

Competition review and timing

The Commissioner of Competition may review any merger or acquisition, regardless of size, according to the Competition Bureau, and some transactions must be notified before closing. If one of the likely buyers is another carrier, ask your lawyer early whether the deal could be notifiable, and how that would affect the timetable and what you can share with a competing buyer.

Get the records a buyer will ask for

BDC’s guidance for sellers says buyers want to understand financial performance, and that an accountant helps prepare year-end and interim financial statements and projections. For a carrier, add the pieces specific to the network: lane-by-lane revenue, terminal throughput, claims and damage history, safety records in each province and fleet age and maintenance logs. BDC also suggests reviewing your records with your accountant to make sure they are up to date, that interim statements are accurate and that projections are realistic.

Look after the fleet and the people

Decide before listing whether to keep up routine maintenance, to replace the oldest units, or to disclose the replacement need and let the buyer weigh it. Equally, think about the dock and driver teams. BDC suggests working out a transition plan with the buyer that includes a plan to retain employees, customers and suppliers and how you will communicate with them about the change. Decide who needs to know about the sale, when and in what words, and ask your lawyer whether any key manager should be offered a retention arrangement.

Plan the transition

BDC points out that a seller who stays involved after closing, such as through vendor financing or an earn-out, has an especially strong interest in a seamless transition. Decide how long you are willing to stay, what you will hand over, and which shipper and partner relationships you will introduce personally. Be ready to say what you can offer, and ask your lawyer how it would be written into the agreement.