In 2011, the U.S. business market saw the highest level of mergers and acquisitions since 2007, according to M&A research group Mergermarket. While limousine industry statistics show that the market is still largely made up of small fleets, there’s a growing trend toward overall consolidation.
Independent operators have a tendency to feel intimidated by market consolidation, viewing larger companies as vultures picking off weaker competitors. But consolidation can increase opportunities for strong and weak companies alike. For the chauffeur business initiating the transaction, an acquisition or merger can create greater opportunity for profits by increasing market share and customer base. Meanwhile, the owner of the limo business for sale is given the chance to recoup lost value and see their company thrive once again.
When the economy began to falter a few years back, limo customers starting reducing trips to the airport, enjoyed fewer vacations and nights out on the town, and cut car services from wedding and prom budgets. Not surprisingly, large companies with lower costs and wider markets were able to absorb these losses much more easily than mom-and-pop operators. Joining forces with another chauffeur business can streamline expenses and reduce overhead, increasing the chances of survival during downturns and success during economic expansions.
Businesses that grow through consolidation enjoy larger customer bases. It’s always more expensive to create customers than it is to buy them. When you team up with another company, the seller has already done the research, marketing, and relationship-building for you. If they enjoyed a good reputation, you can leverage that goodwill to your advantage. It may also be possible to leverage their prices. Many brand-new businesses get into trouble by setting unsustainably low rates in order to attract new customers. Clients of an established business are used to paying fair prices. Keeping them will require providing excellent service, but not bargain-basement prices.
Resources to Grow
Many small limo businesses operate on very slim profit margins. Because business owners don’t have the resources to grow, their only option for increasing profits is to make cuts. But eventually, every business will run out of expenses to eliminate. Merging with a limousine business for sale can be an accessible growth strategy for limo companies. Through the right combination of seller financing and traditional lending, expanding through mergers and acquisitions can be affordable for companies of all sizes.
Opportunities to Sell
If personal reasons, financial limitations, or old-fashioned owner burnout have you re-thinking your exit timeline, an active M&A market may indicate that it’s a good time to sell. When investors are optimistic, they are more likely to make aggressive moves like growth-oriented acquisitions. A potential for profits can increase offers and even lead to bidding wars. Businesses able to provide strategic benefits to growing companies tend to enjoy the most bargaining power.
Whether it’s in your best interest to go after growth or seek the best sale price, our team of limo business brokers can help you make the right choice for your goals and your business.