MISSISSAUGA, Ont. — More consolidation within the Canadian trucking industry is coming, including the likely arrival of some major US players, according to experts speaking this morning at the sold-out Surface Transportation Summit.
“I think the Americans are coming,” warned Mark Seymour, president of Kriska Holdings. “They’ll buy their way into Canada or find their way in some other way. Building mass and building scale puts us in a better position to defend against what it is they are likely to do.”
Ongoing domestic consolidation and the potential arrival of new competitors from south of the border were a couple of the reasons Kriska chose recently to align with Mullen Group.
“Big customers are looking for capacity right now,” Seymour said. “There are more discussions with shippers around capacity now than price.”
Seymour said Kriska has tried growing organically for the past three to five years but has been unable to add capacity.
David Newman, equity research analyst with Cormark Securities, agreed that US fleets could be looking for a piece of the Canadian market as the owners of small- to mid-sized Canadian carriers look to sell.
“Smaller carriers face a whole host of challenges and it’s going to get tougher,” Newman said, citing a tightening regulatory environment and the driver shortage. “You’ve got US carriers kicking tires.”
He cited Celadon’s purchase of Yanke and Kenan Advantage Group’s purchase of RTL Westcan’s bulk division as two recent examples.
Newman said he wouldn’t be surprised if TransForce is broken up into several divisions and listed in the US or sold, potentially to American firms. But Newman also said there could be more Canadian trucking companies going public as well.
Patrick Cain, vice-president of business development with Cain Express and Titanium Transportation Group, also addressed the appeal of consolidation, having recently sold his family business to Titanium.
“Growth creates challenges for organizations,” he said. “Certainly for a company the size of Cain Express, as we continued to grow we put stress on our people, stress on our processes and systems and stress on our equipment and financing.”
Both Cain and Seymour concluded their respective businesses were too small to compete with the big players on their own.
“If we didn’t have a significant role with a customer, we were relatively easy to replace,” Cain admitted. “Bringing sale to your customers gives you a better relationship.”
But while a merger or acquisition may look good on paper, Seymour acknowledged that how the corporate cultures of the organizations involved will mesh is another consideration. For this reason, Kriska and Mill Creek – the Mullen-owned van carrier included in the joint venture – will continue to be run separately.
“Between 1995 and 2008, Kriska made about seven acquisitions, all of which ended up being tuck-ins,” Seymour said. “Each time we had a rude awakening about how powerful culture was at the company we tried to tuck in. Over time, we learned from our mistakes. In this case we will not be putting Kriska and Mill Creek together for that very reason. Mill Creek by itself has significant scale, it’s very profitable, safe and disciplined so there’s no advantage to try to put them together but there’s a tremendous amount of risk to try to do that.”
Cain added differences in corporate culture are not necessarily a bad thing – as long as both organizations adopt the best that their new partner brings to the table.
“In some cases, differences (in culture) will be for the better,” he said. “Hopefully you can bring something to the table that helps them with their business.”
The Surface Transportation Summit brings together industry-leading shippers and carriers. Look for more coverage throughout the day on Trucknews.com.
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