Prepare Now to Capitalize on the Next M&A Opportunity

With the international supply chain disrupted because of COVID-19, economic uncertainty has led many companies to halt all M&A activity. While we wait for world markets to recover, it’s likely there may be little M&A activity until the pandemic is behind us – but that also makes this the ideal time to position your company so that it can capitalize on future acquisitions or investment opportunities.

Here are five steps you can take now that will save your company time and money later:

1. Due Diligence: Any purchaser or investor will want to review your company’s pertinent documents. To save time and avoid delays later, it is important to gather your company’s records and assess what’s missing, unsigned, or incomplete. The records should include company organization and stock records and contracts with customers, vendors, and employees. Many times, incomplete or unsigned contracts are implemented by the parties and finding, finishing, and signing all necessary documents now will save you time and money later when a potential buyer’s lawyer insists you complete your records before moving ahead with a transaction.
2. Technology: Review your company’s current systems, including general IT, transportation management, and/or warehouse management systems, as applicable. Are they up to date? Are you leveraging your systems and optimizing operations with ready access to data that can influence decisions and quick adjustments?  Importantly, are your company’s systems secure?
3. Misclassification of Employees: Many states, most notably California, New Jersey, Massachusetts, and Virginia have made it difficult and costly for employers who misclassify employees as independent contractors. Accordingly, it is important to review all independent contractor agreements currently in place to ensure compliance with the ever-evolving laws and regulations in this area and to determine if a change in the business model should be taken to minimize the risks of your operations. Also, it is important to avoid classification mistakes because it can lead to violations of federal immigration laws, as a U.S. Citizenship and Immigration Services Form I-9 must be completed for each new paid employee upon hiring. Moreover, while it is clear that an I-9 is not required with respect to independent contractors, all businesses that engage independent contractors should take steps to ensure that work authorizations of its contractors are in place, as well. 
4. Regulatory Compliance: Now is the time to review whether your company complies with all federal and state regulations governing the operation of your business, especially for transport of goods across state lines, certain intrastate travel, and internationally. In addition, a company should plan now for scrutiny of its onboarding procedures applicable to its drivers, whether company drivers or owner-operators, as well as training policies and turnover rate. 
5. Branding Litigation Risk: A company’s marketing materials and website are important tools in minimizing a company’s liability for freight and other claims and maximizing value. A recent line of cases imposes liability on logistics companies based on their online marketing materials where other factors, such as contract terms, were vague. A promise of “seamless service,” coupled with other representations, can convert a broker to a motor carrier for purposes of Carmack liability. Accordingly, all marketing materials branding your business, including your website and its contracts, should be reviewed in light of these cases to determine how your company is holding itself out to the world, its customers, and its shippers, and to make sure they are brought into alignment with your business model. This area of the law is continuously evolving, and employers should familiarize themselves with the latest cases to minimize litigation risks. 

Now is the time to review your internal contracts, procedures, marketing materials, and policies and prepare your company to capitalize on the next opportunity.