I interviewed Finn Laursen who discussed M&A in the Transport Industry.
Can you first provide a brief background of yourself?
Yes. Thank you. And thank you for calling. Yes, I have been in the transport industry for 20 years, both in shipping and forwarding. And then I have been within the IT solutions for transport and logistic another 20 years before a found this company. I had an IT company by myself, which I sold five years ago. So I have tried on my own how to sell its own company.
With your background, how can your clients have any advance of this? How can they get help with mergers and acquisitions?
They have to think about advantages like what kind of business they are doing. I mean, it's not only to move to another point, there are more aspects in the transport company. And there's different kinds of transport. They are transports within the road transport, sea transport, and airfreight, and a combination of all three, of all of them. And I have been working with those kinds of transport and therefore, I very fast can see what kind of transport they have and who I think could be interested in their business, if they want to sell.
What is the process when a company wants to sell?
It all starts with an informal meeting at our office in Copenhagen, or it could be at the seller's office. And then we discuss what kind of ideas they have and how are they prepared to sell companies, they may have a product company that have been maybe run a business for 20 years or more. And they are not to do too much having a great profit but making good money and had a good income over the years. So it's very important to think about this one, two, three years before you're really going to sell your company.
So we have an informal meeting and then if we go any further, we make an agreement and we then make a small teaser and send to those buyers we think could be good for the seller, for the selling company. And after the teaser, and if the seller pays the buyer a small interest, we make an NDA with the buyer. And then we have made an information memorandum with a [inaudible 00:03:14] financial figures and also oversee the budget for the next two to three years.
And then without the seller being with us, the seller is coming later when we have agreed on a price that we know that the seller would like to have in that range of that price. And then we take the seller with us because sometimes we're having to make negotiations with a buyer who sometimes can get [inaudible 00:03:59] each other. But that doesn't matter if we are getting a little bit upset with the buyer because we're not going to work in [inaudible 00:04:06] with the buyer afterwards.
Many sellers, they have to buy [inaudible 00:04:12] in the company for at least one, half or two years, together with the buyer, and therefore it is important to they have a good feeling about each other, and they can see each other every day without getting upset.
Does the seller have a realistic idea of the price they want to sell?
Not really. Some of them have. But many times, they have maybe 20 to 40% more that their company could bring in. So there, we have to tell them where we think the price should be. It could be, of course, they can have a higher price if they agree on a certain amount for the first or second year. So they have an interest to make sure that that company is going to do the same good performance as they were doing before when it was their own business.
Are there any companies that to sell or buy?
Yes. There are. They're both, I think, in today, in Scandinavia, I think there are more companies who wants to buy than companies are selling. And there we see sometimes that, especially if the owner is getting older and do not have some party in the family to take over, we see when they start to do this, it may be sometimes too late. We always say to our clients, if you want to sell, sell when you are on the top, not when you're going down, because many think, "Okay. Next year is getting better." And then if next year is not getting better, the price is only going one way, and that is down.
So it's important to find the right time to do it and to make sure and to have someone to help to start this process.
So is selling your company, your so-called baby, is this the same as when you sell a service or a product? Can you talk about what is important before you start to process?
It's important that you realize that when you're talking about selling your service and your product, because your services and products [inaudible 00:06:54] big pride in your product and your service, it's not the same as when you're selling your own company. I have tried by myself when I sold my IT company five years ago. It was a different process you have here, because you have so many feelings within it. It's like being a part of your family that you're having to not work with anymore. So that's important that you have somebody to help you. It could be [inaudible 00:07:25], a company like ours. It could be solicitor or it could be somebody else. But I think it's important that you have a third party to give you the right advice and to do some of the negotiations for you in this process.
What is your advice if someone goes in and plans for selling their company?
I think they have to, first, I think they have to think about how is my company today. Is it really a good shot on the figures? Is it a good turnover? Can I approve an increase in turnover for the last three to five years? Can I also prove that there's been an interest in the [inaudible 00:08:18] for the last three to have years. That is important. And also, that I've made some [inaudible 00:08:24] who looks very similar what I have made in the increase for the past years.
Also, it's important, many companies, when the buyer company, they're wanting to have the second person in the company so [inaudible 00:08:38] for you is that the right person who can take over the business if the seller [inaudible 00:08:46] go into [inaudible 00:08:47] he doesn't want to carry on in the business. Or if they make an agreement that the seller is leaving the company...very soon. And then it's [inaudible 00:09:07] and the company and has a good [inaudible 00:09:10] with the [inaudible 00:09:11] and the customers.
Another thing is, of course, also, you have to bear in mind to think about how important is the company name for me when I [inaudible 00:09:23] is important that is [inaudible 00:09:26] bear my name, or is it not very important to you. Many who sell their company operations [inaudible 00:09:34] 20 or 30 years, [inaudible 00:09:36] with the company name is going to stay for another five to ten years, some way or the another. So those things, you really have to think about before you're starting, go into an MNA or another advisor to sell your company.
Well thank you, Finn, for sharing today.
Yeah. Okay. You're welcome.
About Finn Laursen
Managing Partner at Laursen Partners and Director / Advicer for Venzone Consulting