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Acquisition activity in the Western Canadian trucking industry and the importance of factors influencing this activity

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Title: Acquisition activity in the Western Canadian trucking industry and the importance of factors influencing this activity
Author: Frier, Ian Earle
Degree Master of Science in Business - MScB
Program Business Administration
Copyright Date: 1970
Subject Keywords Transportation, Automotive -- Canada -- Consolidation
Abstract: The Western Canadian Trucking Industry has been undergoing much acquisition activity since 1950. Because of the growing importance of this, it is essential that the effects on the performance of trucking firms be fully understood. This study is meant to be an initial inquiry to document, and to identify the factors that have been conducive to this activity in the Western Canadian Trucking Industry principally for the time period 1950-1968. This investigation was principally conducted through the interview technique. The sample of firms used in this study, although not all inclusive, was generally agreed among those interviewed to consist of all the major trucking firms active in acquisition activity in the Western Canadian Trucking Industry. Many factors are isolated as being conducive to this activity. These factors were identified principally from current literature on the merger field generally. The relative importance of these factors is discussed. This study found that many of the acquisitions that have taken place since 1950 were principally to extend the route authority and commodity base of operations. These are of a market-oriented type generally typified by end-to-end acquisitions designed to offer better services. Most consist of larger firms acquiring smaller trucking firms, usually ones in financial difficulty. In almost all cases, the most valuable asset of the acquired firm has been the route authority. In practical terms, it was found that the only expedient way for a trucking firm to expand was to purchase additional existing route authorities, since an applicant for a new route authority must prove public convenience and necessity to the regulators. The environmental factors isolated in this study have been conducive to acquisition activity. This activity occurred during periods of economic expansion when business expectations were generally high and many firms were available for sale after incurring operating difficulty during the preceeding recession. The legal factor was also found to be strongly conducive to this activity. This was attributed to the regulatory practices of restricting entry and relatively easy approval of route authority transfers. Much of the acquisition activity was attributed to the exploitable situations that prevailed after World War II, the fortuitous railway strike of 1950 and completion of the Trans-Canada Highway. It was also found that many industry factors were conducive to the acquisition activity. The technological factor suggests that larger firms have been desirable to provide the managerial and capital base necessary to keep a firm competitive. The diversification factor suggests that many trucking firms diversified their geographic and commodity base to stabilize earnings, balance head and back hauls, and offer better service in hopes of gaining more traffic. The industry is still in the early stage of the industry life cycle with a few larger, financially more stable firms surviving the forces of competition. This factor suggests that acquisition activity should tend to slow down as the opportunities for expansion and acquisition become less. Many small trucking firms, with limited management ability, either went bankrupt or recognized the need for the many specialized abilities necessary for survival and have tended to be acquired as a result. The financial factor tended to be conducive to the acquisition activity as well. Many small trucking firms have run into a squeeze where they have not been able to properly finance equipment and expansion and have tended to be acquired or go bankrupt. The sympathetic factor, where one carrier sees another expand services through route authority acquisition and hastens to do likewise, can also be viewed as being conducive to this activity. Economies of scale were found to have little effect on the acquisition activity. Although evidence shows that there are no economies of scale of firm size, it was suggested in the discussion that there may be economies of density, management, accounting, advertising and finance that tend to be conducive to acquisition activity.
URI: http://hdl.handle.net/2429/34333
Series/Report no. UBC Retrospective Theses Digitization Project [http://www.library.ubc.ca/archives/retro_theses/]
Scholarly Level: Graduate

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