The art of the deal

WOODBRIDGE, Ont. — Titanium Transportation Group was never meant to stay small. The vision was always to grow, even when Titanium was operating as a freight brokerage in 2002 from its 500 sq.-ft. headquarters, which sat atop a sketchy strip plaza at Toronto’s Dufferin and Finch

“We couldn’t get anywhere else to rent to us,” recalled Marilyn Daniel, chief operating officer of Titanium, now 400 trucks strong and one of Canada’s few publicly traded transportation companies. “We had nothing. People wanted security deposits.”

What Marilyn, and husband Ted, did have, was a varied business background – none of which involved trucking. That, and an opportunity. Ted worked in the finance industry and worked on corporate turnarounds. One of the companies he was involved with attracted the attention of TransForce, Canada’s largest trucking company led by Alain Bedard. TransForce itself was growing rapidly through acquisitions.

“It looked like he was having a lot of fun,” Ted recalled of his chance meeting with Bedard. The Daniels realized the trucking industry was ripe for consolidation but also knew their fledgling trucking business needed a “deep pocket partner” to fund its growth.

“Banks are not going to help you grow by taking on any risk,” Ted Daniel said in a recent interview with Truck News. “We needed a strong private equity partner who could help fund our growth.”

Titanium had bought its first truck in 2005 and was operating as both an asset- and non-asset based transport company when it attracted private equity investors. It experienced some of its early growth through the recession years of 2008 and 2009.

“Those were good years for us,” Marilyn recalled. “We had an advantage. Where people were scaling back, we had nothing to scale back.”

In 2011, Titanium Group made its first acquisition, bringing Flex-Mor Industries into the fold and more than doubling in size to about 80 power units.

“Flex-Mor Industries was a really transformational acquisition,” Marilyn said. “It really moved us from a little company to a much bigger company.”

The deal was funded though a combination of shares and cash, which was provided by the company’s private equity partners. “We had a three-year plan to pay them back,” Marilyn recalled. “We paid them back in one.”

That was the first of eight acquisitions Titanium has made over the past five years, making it one of Canada’s most active buyers of transportation companies. The biggest of those deals came last year when Titanium announced the acquisition of Muskoka Transportation, its 100-plus power units and 170 employees. Marilyn said while every deal is different, they’ve all been successful.

“There is no formula for an acquisition,” she said. “You can’t say ‘I’m going to open the book, go to page one and here is how it’s going to transact’.”

Titanium Transportation Group listed on the Toronto Stock Exchange (TSX) last spring, giving it access to more capital to fund its growth. Management has stated they hope to grow at a pace of two acquisitions per year. Already busting out of its current location on Zenway Blvd. in Woodbridge, the company is eagerly planning a move into a new terminal and headquarters in Caledon, Ont. this summer. Having established itself as an ambitious buyer of transport businesses, the Daniels say there is no shortage of targets in Titanium’s pipeline.

“We have at least half a dozen non-disclosure agreements that we’re currently under,” Ted said. “It’s not a question of leads, it’s a question of making sure that the acquisition we do next will be a good fit, that it’s a win-win.”

Titanium likes to make deals that involve not just cash, but also shares in the company, so the previous owners maintain a vested interest in the company and its growth. They’re willing to look at companies that are under financial duress, their balanced sheets strained.

“I can fix a bad balance sheet with a cheque,” Ted quipped, adding the work then begins to fix the underlying problems within the business.

“A cheque won’t fix the problem, but it will help set the stage to address the problems that led to a bad balance sheet,” Marilyn added.

Often, these companies have fallen into financial hardship because they’ve failed to keep pace with technological change. In some cases, the Daniels say, Titanium can fix these organizations by investing in and implementing the technologies it’s already using.

“The fact that you had a bad year or two or three doesn’t mean you’re not good at what you do,” Marilyn said. “It just means the industry is getting really sophisticated and you need the money to function in it.”

When a business owner approaches Titanium to inquire about a sale, Ted starts the process by viewing the potential match through his financial lens. His expertise are in finance, Marilyn’s in operations. It’s she who gets giddy at the sight of freshly polished chrome.

Ted starts by asking the tough money questions, such as “Have you crystallized your capital gains exemption?”

Once he’s analyzed the financials, Marilyn gets involved, and takes a hard look at the operational side of the business. Their roles and responsibilities in developing a deal rarely intersect. Marilyn’s advice to prospective sellers is to be honest and transparent from the start. Prepare the business for sale and empty the closets of any skeletons. Integrity above all else is what she’s looking for in a business owner with whom to do a deal.

“You have to have integrity,” she said. “That’s one of the biggest things. I have to see what your business is like. If it’s bad, it doesn’t mean I’m not going to buy it and if it’s good, it doesn’t mean I’m going to buy it. Prepare your business. And that doesn’t mean sprucing it up and putting fresh flowers in the vase. It means stripping out what you’ve put through there that you shouldn’t be putting through there.”

When a deal is announced, Titanium management acts quickly to communicate the details to employees of the acquired company. Titanium doesn’t have a history of gutting the companies it takes over.

“I’m not looking to wipe out somebody’s business,” Marilyn stressed. “I’m looking to take the best out of it and make it even better.”

Marilyn is well aware that drivers are in high demand and can jump ship before ever setting foot in a Titanium-owned truck.

“That’s the first thing I tell them,” she said, when asked how she addresses newly acquired drivers once a deal has been made. “We’ve always been very driver-centric. We really try to make sure we remember where our business happens. It happens on the dock, so you need a good core (of drivers). I tell them we have high driver retention and a low turnover rate for a reason, so it’s up to them. In most cases they like what they hear. The retention we’ve had on every acquisition has been excellent.

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James Menzies is editor of Today's Trucking. He has been covering the Canadian trucking industry for more than 20 years and holds a CDL. Reach him at or follow him on Twitter at @JamesMenzies.

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