Tennessee Steel Haulers (TSH), a Nashville-based flatbed logistics company, was in its second generation of leadership when Daseke (NASDAQ: DSKE), the Addison, Texas-based flatbed and specialized transportation giant, acquired the family-owned business in 2017.
Several factors drove the family to sell, said Craig Stanley, a former TSH co-CEO who now holds an executive position with Daseke. One was filial dynamics. Stanley and his twin brother Gregg along with their brother-in-law Michael Sheehan were running the company, he said, and “there’s that issue of having three siblings in the business. Then everyone has three kids. We thought ‘if all these grandkids want to get in the business, do we really want to fight that fight?’”
FreightWaves spoke with Stanley and several other executives helming Daseke companies about why they decided to sell their businesses. One of the most aggressive trucking companies in North America, Daseke acquired 17 firms over the past decade, most of them family-owned. Mergers and acquisitions grew Daseke revenues from $30 million in 2009 to $1.6 billion in 2018 (the company is celebrating its 10th anniversary this year) and enabled the firms it purchased to address succession planning and operational issues.
In the following interview excerpts, the executives talk about unlocking equity, managing risk and the bittersweet experience of selling the family legacy.
Rick Williams, the founder and CEO of Central Oregon Trucking Company (COTC), never planned to sell the over-the-road, irregular route flatbed company he founded in 1992.
Business was booming, and he had in place a solid succession plan – maintain ownership or give each executive manager a piece of the business and dilute his share. The leadership team was young, with the average age hovering around the mid-30s. And Williams had put together a strong board of directors, of which he was chairman.
“Trucking is very much about personal relationships, with the drivers, the customers,” he observed. “Generally people build their companies to be long-term and sustainable; to stay in the family, not to sell.”
But then Don Daseke came calling. As Williams and other Daseke leaders recount, the soft-spoken former real estate magnate has a clear modus operandi – a slow and steady courtship, married to a compelling sales pitch.
“What changed my mind was the structure Don presented,” Williams said. Joining the team, Daseke told him, would allow COTC to take advantage of shared purchasing power, technology innovations and other synergistic business opportunities. Meanwhile, the corporate office would stay out of COTC’s everyday operations.
“Selling the company was simply a way to take some equity out of the business but still be able to manage the business as I saw fit,” said Williams, who sold COTC to Daseke in 2013.
There’s more to succession planning than selecting the right CEO, Williams added. “When you’re trying to transition leadership, you’re not always cognizant of how to transition employees, shippers and vendors,” he said. “But at the end of the day you have to transition the ‘follows’ – you have to transition them more than you have to transition the leader.”
That said, Williams is now in the process of grooming his 33-year old son Luke to take over COTC. Luke became president in December.
“I wanted it to stay in the family,” Williams said. “It was my baby.”
Daseke’s record 2018 revenues represented a 91 percent increase compared to 2017. Fueling that surge are the acquisitions – the parent company bought seven trucking outfits in 2017 alone – as well as its acquisition strategy. Daseke targets businesses with a healthy balance sheet, CEO Don Daseke told FreightWaves, and “works hard to ensure the legacy of the brand name and the leadership carry on.”
Unlike private equity buyers, Daseke doesn’t eliminate management once the acquisition has gone through. Of the 17 acquisitions, Don said, 15 are helmed by the same CEOs who were running the company prior to the sale. “One retired, and one we fired because he was not operating the company in a safe manner. Our intention with every acquisition is to find a permanent home for that company.”
That pitch persuaded Phil Byrd, CEO of Charleston, South Carolina-headquartered Bulldog Hiway Express, an open-deck and flatbed carrier with extensive port drayage operations in the Southeast.
“Don in his very professional and persistent way kept illustrating to us how we could benefit from joining,” said Byrd, a former chair of the American Trucking Associations who shares Bulldog leadership with chairman Rod Moseley, the eldest son of founder R.D. Moseley, who passed away in 2012. “No one loses their job; you run an autonomous operation but collaborate to take advantage of synergy. Your brand and name recognition will remain the same.”
Unlike COTC’s Williams, Byrd was worried about Bulldog’s succession plan. “We realized it was very weak, and did not protect our long-term staff.”
Plus, in a tight trucking market, Byrd was concerned about being able to fulfill customer obligations. “When you become a Daseke team member that can flex up and flex down – all of a sudden it became very interesting to me,” Byrd said. “By becoming part of a big corporation, the hope was we wouldn’t stumble and fall on our faces.”
Daseke acquired Bulldog in 2015. “He didn’t overplay; he didn’t underplay,” said Byrd of Don Daseke’s approach and follow-through. “He has been a gentleman in every sense of the word.”
Most of the companies in the U.S. flatbed industry are family-owned. The typical firm is around 40 years old – and the average insurance policy is about $5 million -$10 million. That’s a drop in the bucket in a litigious society and in an accident-prone industry.
The opportunity to limit risk from a lawsuit was a selling point for TSH. “We’re not scared of litigation,” said Craig Stanley, “but it’s a huge part, and everybody wants to sue everybody for everything. We were seeing the awards and thought that [a similar award] could just cripple us. Insurance is becoming more expensive. We saw the writing on the wall.”
Daseke, Don said, has a $100 million insurance policy.
TSH was a profitable business, and over the years the company fielded an “ungodly number of offers,” according to Stanley. Don himself made three attempts over five years before the family finally accepted.
But selling a family business is almost always a double-edged sword.
“If you have a good company you’re going to get paid what you’re worth,” said Stanley, whose father, founder Syd Stanley, is now president. Craig and Gregg were co-CEOs until Craig moved into his current position as president of Daseke Logistics. “But in the end, it’s no longer yours. You can still run it, but it’s not yours, and that’s a huge mind shift that people don’t realize. It’s been a life lesson to go through for the past 15 months, to know this is no longer part of your family.”
That said there are few regrets. The year 2018 was TSH’s best year yet, said Stanley, adding, “we [truckers] are not a trusting bunch, and thus far everything Daseke said they are going to do they have done.”