Transportation Volatility /First Deal

searcher profile

April 28, 2024

by a searcher in Alba, TX 75410, USA

So I have a Perplexing question for my first post,?!! Given the current volatility of the Transportation sector in whole, From being in the industry for many years I see Heavy Haul tow truck and Fleet Services a growing sector. Because this is my first deal, I lack the experience and thus does my board for doing deals . I'm trying to play it safe and keep it from 800k To 1 million Could I get please get some feedback on the Heavy Haul Tow truck and Fleet Services sector and feedback on if trying to keep my first deal to the 800k to 1 million is a good safe place to start ??
Thanks
Edmond

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commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
Great question. I think the challenge here is that just about all industries have risks. I think what you need to focus on is the historical performance of the specific company you are acquiring and the relationships that company has. Even though a certain industry might be struggling right now (and transportation definitely is), if you find the right company that has insulated themselves from some of the industry risks or has a means to remain profitable despite market conditions, it could still be a great opportunity despite the market conditions.

Secondly, as for your question about size, it is really about how comfortable you are with what you need to invest in your first deal. If you goal is to do a roll-up strategy, you definitely want to start with something you are comfortable you can handle and is not too large. The size deal you are looking at from an EBITDA perspective definitely should have enough meat the bone to pay you a decent wage, be able to grow at a reasonable pace, and be a nice starting point for additional acquisitions.

If you need help analyzing the specific opportunity from a lender perspective, please do not hesitate to reach out. You can reach me here or directly at redacted Good luck.
commentor profile
Reply by a searcher
from Bowling Green State University in Surrey, BC, Canada
So, really, it's transportation adjacent. In a downturn you may see customer volumes decrease (let's goods being shipped) and maybe see an increase of used vehicles hit the resale market. As a heavy tow and service shop, you may feel some of that; or, you'll see folks riding out their trucks and breaking down more bringing you *more* business.
In any case, it's probably tough to build much goodwill in this space. Be careful with the condition of tows you're buying and understand the customer-base. Remember to model capex and maintenance into your projections.
I'm guessing fairly competitive space, but value goes to a) response times and b) reliable fleet service - so, need a strong shop function. And fragmented with low barriers to entry, so lots of folks coming in on a wish and a truck.
I've seen this business type work well - had a few really good service contracts that kept the shop busy. And shipping container repairs can add a bit of a nice income stream. Good luck!
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