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Acquisition activity in the Western Canadian trucking industry and the importance of factors influencing.. Frier, Ian Earle 1970

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ACQUISITION ACTIVITY IN THE WESTERN CANADIAN TRUCKING INDUSTRY AND THE IMPORTANCE OF FACTORS INFLUENCING THIS ACTIVITY  by IAN EARLE FRIER B.S.F., U n i v e r s i t y o f B r i t i s h C o l u m b i a , 1966  A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION  i n the F a c u l t y of Commerce and B u s i n e s s  Administration  We a c c e p t t h i s t h e s i s as c o n f o r m i n g t o t h e required standard  THE UNIVERSITY OF BRITISH COLUMBIA March, 1970  In p r e s e n t i n g t h i s  thesis  in p a r t i a l  f u l f i l m e n t o f the requirements f o r  an advanced degree at the U n i v e r s i t y of B r i t i s h Columbia, the I  Library shall  make i t f r e e l y a v a i l a b l e  f u r t h e r agree t h a t p e r m i s s i o n  for  for  I agree  r e f e r e n c e and  f o r e x t e n s i v e copying o f t h i s  that  study. thesis  s c h o l a r l y purposes may be granted by the Head o f my Department o r  by h i s  representatives.  of this  thesis  written  permission.  Department of  It  i s understood that copying o r p u b l i c a t i o n  f o r f i n a n c i a l gain s h a l l  not be allowed without my  Commerce and B u s i n e s s A d m i n i s t r a t i o n .  The U n i v e r s i t y o f B r i t i s h Vancouver 8, Canada  Columbia  ABSTRACT  The  Western Canadian T r u c k i n g  I n d u s t r y has been u n d e r g o i n g much  a c q u i s i t i o n a c t i v i t y s i n c e 1950. Because o f t h e growing i m p o r t a n c e o f t h i s , i t i s e s s e n t i a l t h a t t h e e f f e c t s on t h e performance o f t r u c k i n g f i r m s be f u l l y u n d e r s t o o d .  T h i s study i s meant t o be an i n i t i a l  inquiry  t o document, and t o i d e n t i f y t h e f a c t o r s t h a t have been c o n d u c i v e t o t h i s a c t i v i t y i n t h e Western Canadian T r u c k i n g the t i m e p e r i o d  This technique.  Industry  principally for  1950-1968.  i n v e s t i g a t i o n was p r i n c i p a l l y conducted t h r o u g h t h e i n t e r v i e w The sample o f f i r m s used i n t h i s s t u d y , a l t h o u g h n o t a l l  i n c l u s i v e , was g e n e r a l l y agreed among those i n t e r v i e w e d  to c o n s i s t of a l l  the major t r u c k i n g f i r m s a c t i v e i n a c q u i s i t i o n a c t i v i t y i n t h e Western Canadian T r u c k i n g to t h i s a c t i v i t y .  Industry.  Many f a c t o r s a r e i s o l a t e d  as b e i n g  conducive  These f a c t o r s w e r e • i d e n t i f i e d p r i n c i p a l l y from c u r r e n t  l i t e r a t u r e on the merger f i e l d g e n e r a l l y .  The r e l a t i v e  importance o f  these f a c t o r s i s d i s c u s s e d . T h i s s t u d y found t h a t many o f t h e a c q u i s i t i o n s t h a t have t a k e n  place  s i n c e 1950 were p r i n c i p a l l y t o e x t e n d t h e r o u t e a u t h o r i t y and commodity base of o p e r a t i o n s .  These a r e o f a m a r k e t - o r i e n t e d  type g e n e r a l l y t y p i f i e d by  end-to-end a c q u i s i t i o n s d e s i g n e d t o o f f e r b e t t e r s e r v i c e s .  Most c o n s i s t o f  l a r g e r f i r m s a c q u i r i n g s m a l l e r t r u c k i n g f i r m s , u s u a l l y ones i n f i n a n c i a l difficulty.  I n a l m o s t a l l c a s e s , t h e most v a l u a b l e a s s e t o f t h e a c q u i r e d  f i r m has been t h e r o u t e a u t h o r i t y .  I n p r a c t i c a l t e r m s , i t was found  that  the o n l y e x p e d i e n t way f o r a t r u c k i n g f i r m t o expand was t o purchase a d d i t i o n a l e x i s t i n g r o u t e a u t h o r i t i e s , s i n c e an a p p l i c a n t f o r a new  route  a u t h o r i t y must prove p u b l i c c o n v e n i e n c e and n e c e s s i t y t o t h e r e g u l a t o r s .  The e n v i r o n m e n t a l f a c t o r s i s o l a t e d i n t h i s study have been c o n d u c i v e to a c q u i s i t i o n a c t i v i t y .  This a c t i v i t y occurred  e x p a n s i o n when b u s i n e s s e x p e c t a t i o n s  during periods  o f economic  were g e n e r a l l y h i g h and many  firms  were a v a i l a b l e f o r s a l e a f t e r i n c u r r i n g o p e r a t i n g d i f f i c u l t y d u r i n g t h e preceeding recession.  The l e g a l f a c t o r was a l s o found t o be s t r o n g l y  conducive to t h i s a c t i v i t y .  T h i s was a t t r i b u t e d t o t h e r e g u l a t o r y  t i c e s o f r e s t r i c t i n g e n t r y and r e l a t i v e l y easy a p p r o v a l transfers.  of route  prac-  authority  Much o f t h e a c q u i s i t i o n a c t i v i t y was a t t r i b u t e d t o t h e e x p l o i t -  a b l e s i t u a t i o n s t h a t p r e v a i l e d a f t e r World War I I , t h e f o r t u i t o u s r a i l w a y s t r i k e o f 1950 and c o m p l e t i o n o f t h e Trans-Canada Highway.  I t was a l s o found t h a t many i n d u s t r y f a c t o r s were c o n d u c i v e to the acquisition activity.  The t e c h n o l o g i c a l f a c t o r suggests t h a t l a r g e r  f i r m s have been d e s i r a b l e t o p r o v i d e  t h e m a n a g e r i a l and c a p i t a l base  n e c e s s a r y t o keep a f i r m c o m p e t i t i v e .  The d i v e r s i f i c a t i o n f a c t o r s u g g e s t s  t h a t many t r u c k i n g f i r m s d i v e r s i f i e d t h e i r g e o g r a p h i c and commodity base t o s t a b i l i z e e a r n i n g s , b a l a n c e head and back h a u l s , and o f f e r b e t t e r s e r v i c e i n hopes o f g a i n i n g more t r a f f i c .  The i n d u s t r y i s s t i l l  i n the  e a r l y s t a g e o f t h e i n d u s t r y l i f e c y c l e w i t h a few l a r g e r , f i n a n c i a l l y more s t a b l e firms s u r v i v i n g the forces o f competition. a c q u i s i t i o n a c t i v i t y should  This  f a c t o r suggests  tend t o s l o w down as t h e o p p o r t u n i t i e s f o r  e x p a n s i o n and a c q u i s i t i o n become l e s s .  that  Many s m a l l t r u c k i n g f i r m s , w i t h l i m i t e d management a b i l i t y , went b a n k r u p t o r r e c o g n i z e d the need f o r t h e many s p e c i a l i z e d  either  abilities  n e c e s s a r y f o r s u r v i v a l and have tended t o be a c q u i r e d as a r e s u l t .  The  f i n a n c i a l f a c t o r tended t o be c o n d u c i v e t o t h e a c q u i s i t i o n a c t i v i t y as well..  Many s m a l l t r u c k i n g f i r m s have r u n i n t o a squeeze where they have  not been a b l e t o p r o p e r l y f i n a n c e equipment and e x p a n s i o n and have tended t o be a c q u i r e d o r go b a n k r u p t .  The s y m p a t h e t i c f a c t o r , where one c a r r i e r  sees a n o t h e r expand s e r v i c e s through r o u t e a u t h o r i t y a c q u i s i t i o n and h a s t e n s to do l i k e w i s e , can a l s o be viewed as b e i n g c o n d u c i v e to t h i s  activity.  Economies o f s c a l e were found to have l i t t l e e f f e c t on the a c q u i s i t i o n activity.  A l t h o u g h e v i d e n c e shows t h a t t h e r e a r e no economies o f s c a l e  o f f i r m s i z e , i t was s u g g e s t e d  i n the d i s c u s s i o n t h a t t h e r e may be economies  o f d e n s i t y , management, a c c o u n t i n g , a d v e r t i s i n g and f i n a n c e t h a t tend t o be conducive to a c q u i s i t i o n  activity.  TABLE OF CONTENTS  CHAPTER I.  II.  PAGE INTRODUCTION  . ...  1  O b j e c t i v e and Scope o f Study  1  Importance o f Study  2  Definitions  3  C o n t e n t s o f Chapters  5  FACTORS INFLUENCING MERGER ACTIVITY B r i e f H i s t o r y o f Merger A c t i v i t y  7 i n N o r t h A m e r i c a ...  8  The  F i r s t Merger Movement  9  The  Second Merger Movement  9  The Recent Merger Movement  10  Environmental Business  Factors  11  Cycle Factor  11  Legal Factor  14  Economic D i s t u r b a n c e Industrial  Factor  Characteristics  15 16  Economies o f S c a l e F a c t o r  16  Technological Factor  17  Diversification  18  Factor  Industry L i f e Cycle Factor  19  Management F a c t o r  22  Financial  22  Factor  Sympathetic Factor  23  ii CHAPTER III.  PAGE ACQUISITION ACTIVITY  IN THE WESTERN CANADIAN  TRUCKING INDUSTRY  25  Definition  26  o f t h e Western Canadian T r u c k i n g I n d u s t r y . . .  Growth o f t h e T r u c k i n g I n d u s t r y Growth o f S h o r t and Medium H a u l T r u c k i n g  32  Growth o f Long H a u l T r u c k i n g  3 2 .  Documentation o f A c q u i s i t i o n Trucking  i n the 33  I n t e r m o d a l Ownership  45  Conglomerate Ownership  47 Activity  50  THE IMPORTANCE OF FACTORS INFLUENCING MERGER ACTIVITY IN THE WESTERN CANADIAN TRUCKING INDUSTRY . .'  52  Environmental Factors  52  Business  Cycle Factor  52  Legal Factor  56  Economic D i s t u r b a n c e Industrial  Factor  59  Factors  61  Economies o f S c a l e F a c t o r  62  Technological Factor  64  Diversification  66  Factor  Industry L i f e Cycle Factor  67  Management A b i l i t y  70  Financial  71  Factor  Sympathetic Factor V.  Activity  Industry  Trends I n t h e A c q u i s i t i o n IV.  27  73  CONCLUSIONS  75  BIBLIOGRAPHY  81  iii LIST OF TABLES  TABLE I.  II. III.  IV.  V. VI.  VII. VIII.  PAGE L o c a t i o n o f Merger Peaks i n Seven R e f e r e n c e C y c l e E x p a n s i o n s , 1918-1958  12  I n t e r c i t y T o n - M i l e s Performed i n Canada by Type o f C a r r i e r , 1938-1965  28  T o t a l and Average A s s e t s and Revenues f o r C l a s s I and C l a s s I I C a r r i e r s (Common and C o n t r a c t )  30  D i s t r i b u t i o n o f Gross O p e r a t i n g Revenues by S i z e o f C a r r i e r f o r 1964 and 1965 A l l C a r r i e r s R e p o r t i n g i n 1965  31  Number o f R a i l w a y Cars Loaded i n Canada, 1958-1966  34  i n Piggyback S e r v i c e  M a j o r Firms i n t h e Western Canadian T r u c k i n g I n d u s t r y T h e i r H i s t o r y o f A c q u i s i t i o n A c t i v i t y From 19501969 and t h e Route A u t h o r i t y A c q u i r e d  36  A c q u i s i t i o n s W i t h i n t h e Western Canadian T r u c k i n g I n d u s t r y by Year and F r e q u e n c y , 1950-1969  53  P e r c e n t a g e Growth i n T o n - M i l e s Performed i n Canada by T r u c k  68  CHAPTER I  INTRODUCTION  Merger a c t i v i t y has been i n c r e a s i n g industries  i n North America.  The t r a n s p o r t a t i o n  w i t h much merger a c t i v i t y t a k i n g trucking  industries.  s t e a d i l y since field  place i n the railway,  Much a t t e n t i o n  i s being directed  1945 i n many  i s no e x c e p t i o n , a i r l i n e and toward t h e e f f e c t s  t h a t such merger a c t i v i t y w i l l have on t h e performance o f f i r m s  i n these  industries.  O b j e c t i v e s and Scope o f Study The activity  objective  of this thesis  i s t o document t h e a c q u i s i t i o n  i n the Western Canadian T r u c k i n g I n d u s t r y p r i n c i p a l l y i n t h e  time period  1950-1968, and t o i d e n t i f y the f a c t o r s  cive to this acquisition a c t i v i t y .  t h a t have been condu-  The t h e s i s w i l l proceed from t h e  general to the p a r t i c u l a r w i t h the f i r s t step being the i d e n t i f i c a t i o n of factors which are l i k e l y activity.  The f a c t o r s  t o be r e l e v a n t  found l i k e l y  to the l e v e l of a c q u i s i t i o n  t o be r e l e v a n t ,  Chapter I I , have been i s o l a t e d from the a v a i l a b l e a c t i v i t y generally  The  as d i s c u s s e d i n  l i t e r a t u r e on merger  and tend t o be somewhat t h e o r e t i c a l i n n a t u r e .  b a l a n c e o f t h e t h e s i s a c t s as a case s t u d y .  The p r i n c i p a l  s e c t i o n o f t h i s t h e s i s d e a l s w i t h t h e d o c u m e n t a t i o n " o f the a c q u i s i t i o n a c t i v i t y t h a t has t a k e n p l a c e s i n c e  1950 i n t h e Western Canadian T r u c k i n g  -  Industry.  T h i s documentation was conducted through p e r s o n a l  w i t h knowledgeable interviews  2 -  persons  a s s o c i a t e d w i t h the t r u c k i n g  interviews  industry.  p e r m i t t e d the Author to f i n d out what s p e c i f i c  These  acquisition  a c t i v i t y had taken p l a c e s i n c e 1950, some s i g n i f i c a n t  t r e n d s and a f e e l  for  in causing  the r e l a t i v e importance o f the i d e n t i f i e d f a c t o r s  acquisition  this  activity.  D i s c u s s i o n w i l l be g e n e r a l l y d i r e c t e d toward the f o r - h i r e p o r t i o n o f the i n d u s t r y this  thesis  as d e f i n e d i n Chapter I I I .  The sample o f f i r m s used  r e p r e s e n t a l a r g e p a r t o f the t o t a l a c q u i s i t i o n  activity.  T h i s sample, a l t h o u g h not a l l  i n c l u s i v e , was g e n e r a l l y agreed among  i n t e r v i e w e d to c o n s i s t  the major t r u c k i n g f i r m s  tion activity. current  trends  of a l l  The i n t e r v i e w r e s u l t s domiciled in B r i t i s h  tends  study.  are p a r t i c u l a r l y a c c u r a t e f o r those  Columbia and become l e s s a c c u r a t e f o r f i r m s  Some o f the a c q u i s i t i o n a c t i v i t y  to have been found randomly  interviews  conducted.  Importance  of  the  the  activity.  i n the p r a i r i e p r o v i n c e s , due to time and money r e s t r a i n t s this  those  active in acquisi-  T h i s sample can be assumed to r e p r e s e n t a d e q u a t e l y in acquisition  in  firms located  surrounding  i n the p r a i r i e  provinces  i n c u r r e n t l i t e r a t u r e and through  the  Study  The t r u c k i n g i n d u s t r y  is  e x t r e m e l y complex, embracing f i r m s  w i d e l y d i f f e r e n t o p e r a t i n g types whose o n l y common denominator over the road movement f u n c t i o n .  is  The s i z e and c o m p l e x i t y o f the  c r e a t e d i f f i c u l t problems o f r e g u l a t i o n and management  that  of the  industry  demand  -  understanding  3  -  o f t h e i n d u s t r y ' s b a s i c a t t r i b u t e s and r e l a t i o n s h i p s .  One o f t h e areas o f i n q u i r y t h a t m e r i t s s u b s t a n t i a l a t t e n t i o n i s that o f a c q u i s i t i o n s . This area o f study  i s clearly vital  f o r management  p l a n n i n g and f o r r e g u l a t i o n as i t a f f e c t s t h e performance o f t h e f i r m s i n the i n d u s t r y .  The t i m i n g o f t h i s s t u d y  i s important  as t h e N a t i o n a l  T r a n s p o r t a t i o n A c t d e a l i n g w i t h t r u c k i n g has as y e t not been implemented. An u n d e r s t a n d i n g  o f what has happened and why i t has happened s h o u l d a i d  i n e s t a b l i s h i n g the proper course f o r f u t u r e r e g u l a t i o n .  There has been l i t t l e  l i t e r a t u r e accumulated on t h e t r u c k i n g  i n d u s t r y ' s b a s i c a t t r i b u t e s . Any s t u d y o f t h i s n a t u r e  s h o u l d be a c t i v e l y  encouraged w i t h hopes t h a t i t w i l l add some i n f o r m a t i o n about a v e r y complex and i n t e r e s t i n g i n d u s t r y . Before  proceeding  w i t h t h e o u t l i n e o f each C h a p t e r ' s  contents,  c e r t a i n d e f i n i t i o n a l problems must be c l a r i f i e d .  Definitions D u r i n g the c o u r s e o f t h e a u t h o r ' s f i e l d looseness  study,  considerable  o f e x p r e s s i o n was found i n the u s e o f words n o r m a l l y  w i t h merger a c t i v i t y .  associated  I n an attempt t o c l a r i f y the meanings o f words  used i n t h i s t h e s i s , t h e f o l l o w i n g d e f i n i t i o n s w i l l be p r e s e n t e d .  To  b e g i n w i t h , a t r u e merger i s when one c o r p o r a t i o n o r more i s absorbed i n t o an e x i s t i n g c o r p o r a t i o n . separate  When t h e t r a n s a c t i o n i s consumated, t h e  e x i s t e n c e o f the absorbed f i r m c e a s e s .  A common analogy i s  when two r i v e r s f l o w t o g e t h e r , each w i t h a s e p a r a t e  name., they become  -  4 -  combined under t h e name o f t h e l a r g e s t r i v e r .  I n . c o m p a r i s o n , an amal-  g a m a t i o n i s t h e o r g a n i z a t i o n o f a new c o r p o r a t i o n f o r t h e purpose o f absorbing  two o r more companies.  In the process, the e x i s t i n g  companies  a r e v o l u n t a r i l y e x t i n g u i s h e d and t h e new e n t i t y takes over t h e o t h e r companies'  liabilities  and p r o p e r t y .  A new c o r p o r a t i o n i s n o t c r e a t e d  b y a merger, b u t an amalgamation, o r c o n s o l i d a t i o n as i t i s o f t e n c a l l e d , always c r e a t e s one.  An a c q u i s i t i o n , on t h e o t h e r hand, i s one company's purchase o f a n o t h e r ' s t o t a l o r c o n t r o l l i n g i n t e r e s t , u s u a l l y i n t h e form o f s t o c k . The subsequent o p e r a t i o n o f t h e purchased company i s u s u a l l y o p e r a t e d as a separate  d i v i s i o n or subsidiary.  An a c q u i s i t i o n i s a l s o one company  b u y i n g a n o t h e r company's a s s e t s and t h e a c q u i r e d f i r m goes o u t o f e x i s t e n c e without  r e t a i n i n g any b a r t e r e d  i n t e r e s t i n the buyer.  There a r e o t h e r words commonly used w h i c h d e s c r i b e t h e d i r e c t i o n o f merger a c t i v i t y .  The f i r s t  i s a h o r i z o n t a l u n i f i c a t i o n , which brings  under one r o o f two o r more companies  i n t h e same g e n e r a l f i e l d  or w h i c h produce t h e same p r o d u c t s o r s e r v i c e s . g a i n dominance i n t h e f i e l d  and/or economies  o f commerce  The o b j e c t i v e h e r e i s t o  i nadministration, advertising,  p r o d u c t i o n , d i s t r i b u t i o n and so o n . A v e r t i c a l u n i f i c a t i o n i s one w h i c h combines v a r i o u s companies w h i c h have a s u p p l e m e n t a r y r e l a t i o n s h i p .  A  v e r t i c a l u n i f i c a t i o n c a n be d e s c r i b e d as one where a s u p p l i e r a c q u i r e s a customer o r a customer a c q u i r e s a s u p p l i e r o r a s o u r c e o f s u p p l y .  The  o b j e c t i v e s h e r e a r e p r o d u c t i o n economies, g r e a t e r c o n t r o l o v e r s u p p l i e s and m a r k e t s , s t a b i l i t y o f e a r n i n g s , and o t h e r r e a s o n s .  A n o t h e r form o f u n i f i c a t i o n t h a t has become a common day word i n  -  5  -  c u r r e n t l i t e r a t u r e i s the c o n g l o m e r a t e u n i f i c a t i o n .  By t h i s a company can  c l u s t e r under i t s c o r p o r a t e c o n t r o l the most d i v e r s e k i n d s o f a c q u i s i t i o n s imaginable.  The o b j e c t i v e h e r e i s f o r the component p a r t s t o g a i n p r o p e r  f i n a n c i n g and management i n r e t u r n f o r the a c q u i r e d company's income.  Each  a c q u i s i t i o n by a c o n g l o m e r a t e c o r p o r a t i o n i s e v a l u a t e d on i t s p r e s e n t and p o t e n t i a l p r o f i t a b i l i t y and i n r e t u r n assumes the c r e d i t s t a t u s o f the acquiring  firm.  The r e a d e r s h o u l d be c a u t i o n e d h e r e t h a t a h o r i z o n t a l , v e r t i c a l and c o n g l o m e r a t e u n i f i c a t i o n can t a k e the form o f a merger,  consolidation  o r a c q u i s i t i o n depending on the s p e c i f i c u n i f i c a t i o n b e i n g l o o k e d a t .  Due t o the many p o s s i b l e uses o f t h e s e words and c o m b i n a t i o n s o f meanings, the word  'merger' s h a l l be used as i t i s i n e v e r y day b u s i n e s s  p a r l e n c e , t o mean any t y p e o f inter-company u n i f i c a t i o n .  Other words  w i l l be used i n s p e c i f i c i n s t a n c e s throughout the t h e s i s and t h e y s h o u l d be i n t e r p r e t e d as s p e c i f i c a l l y d e f i n e d i n t h i s s e c t i o n . word  For example, the  ' a c q u i s i t i o n ' i s g e n e r a l l y used i n r e l a t i o n t o the t r u c k i n g  industry.  Most o f the u n i f i c a t i o n s i n t h i s i n d u s t r y have been the p u r c h a s e o f the a s s e t s w i t h the a c q u i r e d f i r m g o i n g out o f e x i s t e n c e o r the purchase o f a n o t h e r company's t o t a l o r c o n t r o l l i n g i n t e r e s t w i t h the subsequent o p e r a t i o n o f the purchased company u s u a l l y o p e r a t e d as a s u b s i d i a r y or separate d i v i s i o n .  Content o f C h a p t e r s  C h a p t e r s I I , I I I and IV c o n s t i t u t e the main c h a p t e r s o f t h i s  thesis.  Chapter I I , a f t e r a b r i e f d i s c u s s i o n o f the h i s t o r y o f merger a c t i v i t y i n  -  North America, w i l l when s t u d y i n g Trucking  The  -  i s o l a t e those f a c t o r s w h i c h a r e l i k e l y t o be r e l e v a n t  t h e cause o f a c q u i s i t i o n a c t i v i t y i n t h e Western Canadian  Industry.  The f a c t o r s i s o l a t e d w i l l be b r o k e n down i n t o e n v i r o n -  m e n t a l and i n d u s t r i a l f a c t o r s . discussed  6  The e n v i r o n m e n t a l f a c t o r s t h a t w i l l be  a r e t h e b u s i n e s s c y c l e , l e g a l and economic d i s t u r b a n c e  i n d u s t r y f a c t o r s t h a t * w i l l be d i s c u s s e d  factors.  i n Chapter I I a r e economies  o f s c a l e , d i v e r s i f i c a t i o n , t e c h n o l o g i c a l , i n d u s t r y l i f e c y c l e , management, f i n a n c i a l and s y m p a t h e t i c f a c t o r s .  Chapter I I I w i l l p r i n c i p a l l y be concerned w i t h the d o c u m e n t a t i o n o f t h e a c q u i s i t i o n a c t i v i t y t h a t has t a k e n p l a c e 1950.  i n the i n d u s t r y  A d i s c u s s i o n o f the growth o f t h e t r u c k i n g i n d u s t r y w i l l a l s o be  presented i n t h i s chapter. cussion o f the trends  The c h a p t e r w i l l  that are developing  conclude w i t h a b r i e f d i s -  i n this acquisition activity.  Chapter IV w i l l p r e s e n t a d i s c u s s i o n o f t h e r e l a t i v e o f the f a c t o r s i s o l a t e d i n Chapter I I i n c a u s i n g The  since  conclusions  w i l l be p r e s e n t e d i n Chapter V.  importance  the a c q u i s i t i o n a c t i v i t y .  CHAPTER I I  FACTORS INFLUENCING MERGER ACTIVITY  The o b j e c t i v e o f t h i s c h a p t e r i s t o i d e n t i f y f a c t o r s l i k e l y t o be r e l e v a n t when s t u d y i n g t h e cause o f merger a c t i v i t y i n t h e Western Trucking Industry.  Canadian  T h i s c h a p t e r tends t o be t h e o r e t i c a l i n n a t u r e ,  b a s i c a l l y d e r i v e d from c u r r e n t l i t e r a t u r e on t h e merger t o p i c .  The  e x i s t i n g l i t e r a t u r e , a l t h o u g h vague p e r t a i n i n g t o t h e i s o l a t i o n o f underl y i n g f a c t o r s c o n d u c i v e t o merger a c t i v i t y , does o f f e r some i n s i g h t such a s t u d y .  into  The f a c t o r s i d e n t i f i e d as c o n d u c i v e t o merger a c t i v i t y  a r e m e a n i n g f u l l y b r o k e n down i n t o e n v i r o n m e n t a l f a c t o r s l i n k e d t o t h e economy g e n e r a l l y and i n d u s t r i a l f a c t o r s which a r e more p a r t i c u l a r t o t h e c o n d i t i o n s e x i s t i n g i n some i n d u s t r i e s .  Merger a c t i v i t y appears  t o be a r e a c t i o n w i t h i n an i n d u s t r y t o  changes i n t h e e n v i r o n m e n t a l and i n d u s t r y f a c t o r s . t o improve time.  Firms, i n a desire  p r o f i t s , r e a c t to the c o n d i t i o n s which e x i s t at a p a r t i c u l a r  Mergers appear t o be a more a p p r o p r i a t e s o l u t i o n a t some times more  than a t o t h e r s .  When c o n d i t i o n s a r e f a v o u r a b l e , c e r t a i n f i r m s i n an  i n d u s t r y i n i t i a t e changes i n c o r p o r a t e s t r u c t u r e w h i c h a r e c o n s i d e r e d n e c e s s a r y t o p e r m i t s u c c e s s f u l and e f f e c t i v e c o m p e t i t i o n i n t h e f u t u r e . B e f o r e s t a r t i n g t o d i s c u s s t h e e n v i r o n m e n t a l and i n d u s t r i a l a b r i e f h i s t o r i c a l r e v i e w w i l l be p r e s e n t e d o f merger a c t i v i t y America.  factors,  i n North  - 8 -  B r i e f H i s t o r y o f Merger A c t i v i t y i n N o r t h The 1889.  America  f i r s t merger a c t i v i t y can be t r a c e d back t o a few y e a r s  S i n c e t h i s time many i n d u s t r i e s have shown a w i l l i n g n e s s to s e i z e  promising  growth o p p o r t u n i t i e s whether t h i s be t h r o u g h merger a c t i v i t y  or t h r o u g h i n t e r n a l growth. itself  T h i s e x p a n s i o n i s t p h i l o s o p h y has  t h r e e p e r i o d s were 1889-1903, 1926-1930 and  The  F i r s t Merger Movement, 1889-1903  The  e a r l y merger movement was  contemporary l e g a l and  1945  to the  evidently associated with  the development o f a s t r o n g and  c a p i t a l market.  c a p i t a l market s u p p l i e d the r e s o u r c e s  A l e g a l change i n the l a t e 1880's, p e r m i t t i n g one another,  important  (or h o l d i n g companies as they were  commonly c a l l e d ) and The  present.  i n s t i t u t i o n a l changes, i n p a r t i c u l a r the emergence  o f the c o n g l o m e r a t e c o r p o r a t i o n s  well-developed for  expansion.  c o r p o r a t i o n to  own  a f f o r d e d the o p p o r t u n i t y f o r conglomerate c o r p o r a t i o n s to form  n e a r monopolies i n many o f the b a s i c i n d u s t r i e s . Company, i n c o r p o r a t e d i n 1809,  o f an e x i s t i n g  The  expressed  i n the form o f t h r e e d i s t i n c t p e r i o d s o f h i g h merger a c t i v i t y .  The  Oil  before  w h i c h was  An example i s S t a n d a r d  essentially a reorganization  conglomerate.  Second Merger Movement, 1919-1927 The  f i r s t merger movement w h i c h was  c h a r a c t e r i z e d by  o f near m o n o p o l i e s i n many b a s i c i n d u s t r i e s gave way  the  formation  t o much merger  a c t i v i t y p r i n c i p a l l y i n a h o r i z o n t a l and v e r t i c a l d i r e c t i o n d e s i g n e d strengthen  a f i r m ' s p o s i t i o n i n an expanding market economy.  mergers were much s m a l l e r than those  to  These  i n the f i r s t merger p e r i o d and were  - 9 d e s c r i b e d as p i e c e m e a l  a c q u i s i t i o n s d e s i g n e d m a i n l y t o expand t h e  operations of the f i r m . ^  A good example o f t h e t y p e o f merger a c t i v i t y t h a t p r e v a i l e d a t t h i s time i s g i v e n i n t h e o i l i n d u s t r y .  The g r e a t crude o i l s u p p l i e s  w h i c h were b r o u g h t i n t o e x i s t e n c e d u r i n g t h e 1920's, l a r g e l y as a r e s u l t o f f o r t u i t o u s d i s c o v e r i e s , f o s t e r e d much new c o m p e t i t i o n a t t h e p r o d u c i n g l e v e l o f the i n d u s t r y and caused many crude o i l p r o d u c e r s forward i n t o r e f i n i n g , marketing  to i n t e g r a t e  and t r a n s p o r t a t i o n a c t i v i t i e s as a means  o f s e c u r i n g and a s s u r i n g an o u t l e t f o r t h e i r p r o d u c t i o n . ^  T h i s type o f merger a c t i v i t y c o n t i n u e d u n t i l t h e s p e c t a c u l a r f a i l u r e o f some o f t h e p u b l i c u t i l i t y empires p r e c i p i t a t e d a l a c k o f c o n f i d e n c e i n t h e s t o c k market and h e r a l d e d t h e d e p r e s s i o n o f t h e 1930's. The Recent Merger Movement, 1945 The r e c e n t merger movement owes i t s b e g i n n i n g t o t h e c o n d i t i o n s t h a t p r e v a i l e d a f t e r World War I I .  I n t h e mid-1940's, a h i g h  business  e x p e c t a t i o n s p r e v a i l e d and t h e r e was a s t r o n g d e s i r e t o r a p i d l y  overcome  s h o r t a g e s o f raw m a t e r i a l s , management t a l e n t , p r o d u c t i o n and d i s t r i b u t i o n f a c i l i t i e s t o meet t h e e x t r e m e l y h i g h l e v e l o f demand t h a t e x i s t e d a f t e r t h e war. reaction.  The p e t r o l e u m  i n d u s t r y a g a i n g i v e s a good example o f t h i s  The v e r y g r e a t e x p a n s i o n  o f demand f o r many p e t r o l e u m  A. D. H. K a p l a n , "The C u r r e n t Merger Movement H a r v a r d B u s i n e s s Review, May-June, 1955, p. 93.  products  Analyzed,"  2 J . G. McLean, "How C o r p o r a t i o n s Grow," Harvard November-December, 1954, p. 86.  B u s i n e s s Review,  -  10  -  c r e a t e d s e v e r e s h o r t a g e s b o t h o f crude o i l and r e f i n e d p r o d u c t s ,  which  prompted b o t h r e f i n e r s and m a r k e t e r s t o i n t e g r a t e backwards as a means o f a s s u r i n g and  p r o t e c t i n g t h e i r source of  supply.^"  F o l l o w i n g c l o s e b e h i n d t h i s postwar p e r i o d was  an emergence from  the s e l l e r ' s market t h a t p r e v a i l e d i n t o a market where companies had become i n c r e a s i n g l y c o n s c i o u s positions.  The  o f the need t o improve t h e i r  d e s i r e to s t a b i l i z e o u t p u t and  e a r n i n g s was  competitive also  prevalent  i n many i n d u s t r i e s t h a t had n a r r o w p r o d u c t l i n e s s u b j e c t t o s e a s o n a l c y c l i c a l f l u c t u a t i o n s . The a d i v e r s i f i c a t i o n philosophy philosophy  which i s s t i l l  to  or  d e s i r e to s u r v i v e caused many f i r m s t o adopt i n the l a t e 1940's and e a r l y 1950's, a  s t r o n g l y e n t r e n c h e d i n the b u s i n e s s  community  today.  An  i n c r e a s i n g i n f l u e n c e i n the N o r t h A m e r i c a n Economy has been the  appearance o f the c o n g l o m e r a t e c o r p o r a t i o n .  A r e c e n t study  c o n g l o m e r a t e m e r g e r s , i n a m i n o r i t y twenty y e a r s ago,  showed t h a t  have come t o account  f o r a m a j o r i t y o f a l l mergers i n the U n i t e d S t a t e s i n the l a t e 1960's. A l s o o b s e r v e d i n t h i s study was u n i f i c a t i o n s are d e c r e a s i n g  the f a c t t h a t v e r t i c a l and h o r i z o n t a l  as a p e r c e n t a g e o f t o t a l merger a c t i v i t y  in  2 the U n i t e d The  States. above h i s t o r i c a l r e v i e w ,  although  cursory i n nature  indicates  t h a t c e r t a i n c o n d i t i o n s e x i s t e d i n the p a s t t h a t were f a v o u r a b l e  1  I b i d . , p.  to merger  87.  2 G i l b e r t B u r c k , "The F e b r u a r y , 1969, pp. 79-83.  Merger Movement R i d e s H i g h , "  Fortune,  - 11 -  a c t i v i t y a t d i f f e r e n t time periods.-  The n e x t s e c t i o n o f t h i s  w i l l attempt t o i d e n t i f y f a c t o r s which are conducive a c t i v i t y and t h a t a r e l i k e l y activity  Environmental  t o p e r i o d s o f merger  t o be r e l e v a n t when s t u d y i n g  i n t h e Western Canadian T r u c k i n g  chapter  acquisition  Industry.  Factors  There appear t o be f a c t o r s c o n d u c i v e  t o merger a c t i v i t y w h i c h a r e  c l o s e l y a s s o c i a t e d t o g e n e r a l economic c o n d i t i o n s t h a t p r e v a i l a t any one  time.  The f a c t o r s t o be d i s c u s s e d h e r e a r e t h e b u s i n e s s c y c l e , l e g a l  and economic d i s t u r b a n c e f a c t o r s .  The f i r s t t o be d i s c u s s e d w i l l be t h e  business c y c l e . Business  Cycle Factor  A r e c e n t p u b l i c a t i o n p o i n t e d o u t t h a t each o f the t h r e e h i s t o r i c p e r i o d s o f i n c r e a s e d merger a c t i v i t y economic p r o s p e r i t y .  Peak y e a r s  coincided with periods of general  i n t h e number o f b u s i n e s s  were 1920, 1926, 1929 and i n the 1960's.  unifications  Lows i n merger a c t i v i t y  occurred  d u r i n g t h e d e p r e s s i o n o f t h e 1930's and t h e r e c e s s i o n s o f t h e l a t e 1940's and  1950's.'''  An e a r l i e r a n a l y s i s found t h a t h i g h p e r i o d s o f merger  a c t i v i t y occurred during business activity  c y c l e expansions  and t h a t peaks i n merger  came a t t h e t w o - t h i r d s p o i n t i n r e f e r e n c e t o c y c l e expansions  as  2 illustrated  i n Table I .  R o b e r t A. S h o r t , B u s i n e s s P r e n t i c e - H a l l , 1967, p. 2.  Mergers:  How and Why t o T r a n s a c t Them,  R a l p h L. N e l s o n , " B u s i n e s s C y c l e F a c t o r s i n the C h o i c e Between I n t e r n a l and E x t e r n a l Growth," r e p o r t e d i n W i l l i a m W. A l b e r t s and J o e l E. S e g a l l , The C o r p o r a t e Merger, The U n i v e r s i t y o f C h i c a g o P r e s s , 1966, p.61.  - 12 TABLE I  LOCATION OF MERGER PEAKS IN SEVEN REFERENCE CYCLE EXPANSIONS, 1918-1958  Month and Year o f Turning Points Reference Trough (1)  Merger Peak (2)  Reference Peak (3)  Duration of Ref. Expansion  Interval From R e f . Trough t o Merger Peak  (3) - (1)  (2) - (1)  (4)  (5)  (6)  Column (5) as a P e r c e n t o f Column (4)  4/19  5/20  1/20  9  13  144  7/24  2/26  10/26  27  19  70  11/27  2/29  6/29  19  15  79  3/33  2/36  5/37  50  35  70  10/45  5/46  11/48  7  19  8/45  '5/56  7/57  35'  21.  60  4/58  6/60  5/60  25  36  104  202  136  67  TOTAL  Source:  37 . •  R a l p h L. N e l s o n , " B u s i n e s s C y c l e F a c t o r s i n t h e C h o i c e Between I n t e r n a l and E x t e r n a l Growth," r e p o r t e d i n W i l l i a m W. A l b e r t s and J o e l E. S e g a l l , The C o r p o r a t e M e r g e r , The U n i v e r s i t y o f Chicago P r e s s , 1966, p. 61.  - 13 -  One way i n w h i c h t h e b u s i n e s s c y c l e a f f e c t s merger a c t i v i t y i s that during periods o f c y c l i c expansion, The v a l u e o f any p r o s p e c t i v e investment of expectations.  business expectations increase. r i s e s and f a l l s w i t h t h e s t a t e  During periods o f business expansions,  may be p l a c e d on p r o s p e c t i v e mergers. phychology o f buying  and s e l l i n g .  higher  values  A s s o c i a t e d w i t h t h i s i s the  A r e c e n t study suggests  that a s e l l e r  i s g e n e r a l l y more w i l l i n g t o s e l l a f t e r he has had some g a i n and i s n o t still  a t the lowest e v a l u a t i o n o f h i s h o l d i n g s .  t o buy when he f o r e s e e s a d d i t i o n a l gains."'"  A buyer i s most l i k e l y  T h i s would i n d i c a t e a peak  i n t h e merger c y c l e , when t h e s e l l e r can l o o k back and see h i s g a i n s and t h e buyer can l o o k ahead and see h i s f u t u r e g a i n s .  An example o f t h i s type o f a c t i v i t y conglomerate c o r p o r a t i o n a c t i v i t y .  i s presented  i n the current  I t can be argued t h a t t h e modern  conglomerate c o r p o r a t i o n e x i s t s i n periods o f high e x p e c t a t i o n s .  Con-  glomerate corporations p r e f e r a high stock p r i c e to earnings r a t i o to c a r r y out t h e i r expansion  plans.  Only d u r i n g an e x p a n s i o n  of the business  c y c l e i s there a high p r o b a b i l i t y that a d e s i r a b l y high stock p r i c e to e a r n i n g s r a t i o would  exist.  The b u s i n e s s c y c l e f a c t o r a l s o a f f e c t s t h e a v a i l a b i l i t y o f opport u n i t i e s t o merge.  Many f i r m s may r u n i n t o d i f f i c u l t y d u r i n g a p e r i o d  o f low economic a c t i v i t y due t o a d e p r e s s i o n i n t h e i r p r o f i t stream.  It  may be t h a t b a r g a i n p u r c h a s e s tend t o e x i s t o n l y d u r i n g and a f t e r a p e r i o d o f low economic a c t i v i t y .  1  I b i d . , p. 68.  Such a low p e r i o d o f economic a c t i v i t y  - 14 may s e r i o u s l y c u r t a i l e x p e n d i t u r e s  on equipment and o t h e r  necessary  c o m p e t i t i v e t o o l s , and may make management l o o k f o r merger o p p o r t u n i t i e s to a l l e v i a t e t h e i r p o s i t i o n .  As economic c o n d i t i o n s improve, mergers  tend t o i n c r e a s e i n numbers.  I t c a n be argued t h a t t h i s i s p a r t l y  e x p l a i n e d by t h e p s y c h o l o g y o f b u y i n g  and s e l l i n g p r e v i o u s l y d i s c u s s e d .  I t i s c l e a r t h a t merger movements i n b u s i n e s s expansions i n the business business  cycle.  coincide with  When t h e r e a r e downswings i n t h e  c y c l e , t h e r e i s a n o t i c a b l e f a l l i n g o f f o f merger  activity,  and v i s a v e r s a .  Legal  Factor The  activity.  l e g a l environment has a v e r y i n f l u e n t i a l e f f e c t on merger Changes i n t h e l e g a l environment c a n e n a b l e an a b r u p t s t a r t o r  s t o p t o merger a c t i v i t y w i t h i n an i n d u s t r y .  A good h i s t o r i c a l example  o f t h i s o c c u r r e d d u r i n g t h e f i r s t p e r i o d o f i n c r e a s e d merger a c t i v i t y 1889-1903.  from  The p a s s i n g o f t h e Sherman A c t i n 1890 f o l l o w e d a l o n g  p e r i o d o f p u b l i c o u t c r y a g a i n s t t h e c o n c e n t r a t i o n o f economic power i n t o g i a n t near monopoly e n t e r p r i s e s t h a t t y p i f i e d t h e t i m e s . was  passed t o p r e v e n t  the formation o f monopolies.  any  c o n t r a c t , combination,  or conspiracy  two p r o h i b i t e d m o n o p o l i z a t i o n  The Sherman A c t  S e c t i o n one p r o h i b i t e d  i n r e s t r a i n t of trade.  o r a t t e m p t s t o monopolize."''  Section  The p a s s i n g o f  t h i s A c t g r a d u a l l y h a l t e d t h e f o r m a t i o n o f such l a r g e monopolies by merger, thus l e a d i n g t o t h e n o t i c a b l e d e c r e a s e i n merger a c t i v i t y by 1903.  A r t h u r H. Dean, "Some S i g n i f i c a n t A s p e c t s o f t h e Law C o n c e r n i n g M e r g e r s , " An a r t i c l e r e p o r t e d i n American Management A s s o c i a t i o n , R e p o r t Number 4, C o r p o r a t e Mergers and A c q u i s i t i o n s , 1957, p. 35.  At p r e s e n t , a n t i t r u s t laws i n t h e U n i t e d S t a t e s and i n Canada f o r b i d merger a c t i v i t y w h i c h s u b s t a n t i a l l y l e s s e n s c o m p e t i t i o n o r tends to  c r e a t e a monopoly.  These laws have c o n t r i b u t e d t o t h e e x i s t e n c e o f  the c o n g l o m e r a t e c o r p o r a t i o n w h i c h c u t s a c r o s s i n d u s t r y b o u n d a r i e s i n such a way as n o t t o l e s s e n c o m p e t i t i o n o r c r e a t e a monopoly.  The power  o f l e g a l changes a r e b e i n g f e l t by t h e s e c o n g l o m e r a t e o r g a n i z a t i o n s presently.  The t h r e a t o f f o r m a l l e g i s l a t i o n t o c u r t a i l t h e e x p a n s i o n  by merger o f c o n g l o m e r a t e o r g a n i z a t i o n s has r e c e n t l y come t o t h e f o r e f r o n t i n the United States.  J u s t t h e t h r e a t o f such l e g i s l a t i o n and  t h e a d v e r s e p u b l i c i t y a t t a c h e d t o i t has caused t h e s t o c k market acceptance o f congomerate c o r p o r a t i o n s t o c k s t o d e c l i n e . the e x p a n s i o n  T h i s has a f f e c t e d  p l a n s o f many c o n g l o m e r a t e o r g a n i z a t i o n s a d v e r s e l y and, when  such l e g i s l a t i o n i s p a s s e d , c o u l d h e r a l d t h e end o f t h e r e c e n t merger movement.  Economic D i s t u r b a n c e  Factor  Economic d i s t u r b a n c e can have a g r e a t d e a l o f e f f e c t on merger activity.  F o r example, t h e end o f World War I I saw t h e b u s i n e s s w o r l d i n  c o n d i t i o n s conducive expansion  t o merger a c t i v i t y .  i n p r o d u c t i o n and m a r k e t i n g  There was a need f o r r a p i d  facilities  demand f o r goods and s e r v i c e s a f t e r t h e war. enough i n d e v e l o p i n g would l i k e l y  the resources necessary  go i n t o b a n k r u p t c y .  to e x p l o i t the high  I f f i r m s were n o t f a s t t o r e m a i n c o n p e t i t i v e , they  A r e c e n t study d e s c r i b e s the merger  a c t i v i t y i n t h e p o s t war y e a r s r u n n i n g t o t h e end o f t h e 1940's as marked by a d e s i r e t o overcome s h o r t a g e s as w e l l as f a c i l i t i e s  and t o a c q u i r e a c c e s s  t o raw m a t e r i a l s  f o r d i s t r i b u t i o n o f t h e new p r o d u c t s  developed  - 16 -  d u r i n g the war."*" M i n o r economic d i s t r u b a n c e s , such as a.prolonged cause e x p l o i t a b l e s i t u a t i o n s t o e x i s t .  strike,  can  I f an e x p l o i t a b l e s i t u a t i o n  occurs, i t i s highly l i k e l y  t h a t merger a c t i v i t y w i l l o c c u r , much as d i d  happen a f t e r World War  Such p e r i o d s o f economic r e a l i g n m e n t  II.  f i r m s to merge s i m p l y t o develop  the r e s o u r c e s  requires  to r e m a i n c o m p e t i t i v e .  Industrial Characteristics  The likely  preceeding  d i s c u s s i o n p o i n t s out t h a t merger a c t i v i t y i s most  t o o c c u r d u r i n g p e r i o d s o f economic e x p a n s i o n w i t h i t s h i g h  of business expectations.  T h i s merger a c t i v i t y can be s t i m u l a t e d by  economic d i s t u r b a n c e l i k e World War r a p i d expansion.  level an  I I , w h i c h p r o v i d e d the need f o r v e r y  A t the same t i m e , such merger a c t i v i t y w i l l o n l y  p l a c e i f the l e g a l environment does not a c t as a c o n s t r a i n t .  take  Merger  a c t i v i t y a l s o appears t o be c l o s e l y r e l a t e d to many f a c t o r s w h i c h a r e a s s o c i a t e d w i t h c o n d i t i o n s w h i c h e x i s t i n many i n d u s t r i e s .  The  first  to be d i s c u s s e d w i l l be economies o f s c a l e . Economies o f S c a l e F a c t o r I t i s a p p a r e n t t h a t t h e r e a r e many i n d u s t r i e s where s u b s t a n t i a l economies o f s c a l e e x i s t .  A t y p i c a l i n d u s t r y has  s i z e o f f i r m becoming  s u c c e s s i v e l y more e f f i c i e n t up to some p a r t i c u l a r s i z e o r range o f sizes.  A f t e r the most e f f i c i e n t s i z e or range o f s i z e s o f f i r m have  A. D. H. K a p l a n , "The C u r r e n t Merger Movement A n a l y z e d , " B u s i n e s s Review, May-June, 1955, p. 95.  Harvard  - 17 been r e a c h e d , t h e n f i r m s become s u c c e s s i v e l y increases.  One  s e n s i b l e r e a s o n why  economies o f s c a l e .  l e s s e f f i c i e n t as f i r m s i z e  f i r m s grow by merger i s to a c h i e v e  I f economies i n c r e a s e w i t h the s i z e o f the f i r m t h e y  o f f e r a s t r o n g j u s t i f i c a t i o n f o r merger.  I t can be argued t h a t the optimum size''" o f f i r m v a r i e s among i n d u s t r i e s and w i t h i n i n d u s t r i e s o v e r t i m e . increasing returns  I n an i n d u s t r y where l a r g e  t o s c a l e are p r e s e n t , s m a l l f i r m s cannot compete w i t h  l a r g e r f i r m s , assuming no o t h e r advantages a c c r u e to s m a l l f i r m s .  Indus-  t r i e s i n w h i c h l a r g e economies o f s c a l e are p r e s e n t can be e x p e c t e d t o show a r e l a t i v e l y more r a p i d change i n the average s i z e o f f i r m t h r o u g h merger a c t i v i t y . achieving  I t i s a l s o l i k e l y t h a t merger a c t i v i t y aimed at  economies o f s c a l e w i l l be r a p i d at f i r s t and w i l l s l o w down  as t h e s u r v i v i n g f i r m s approach the optimum s i z e . I f economies o f s c a l e e x i s t w i t h i n an i n d u s t r y , one would e x p e c t merger a c t i v i t y to t a k e p l a c e .  The  r e l a t i v e s t r e n g t h s of t h i s merger  a c t i v i t y would v a r y from i n d u s t r y t o i n d u s t r y and  over time w i t h i n  an  industry. Technological Factor A n o t h e r v a r i a b l e w h i c h i s l i k e l y to a f f e c t merger a c t i v i t y i s technology.  The  i m p l i c a t i o n s o f t e c h n o l o g i c a l change are t h a t most i n d u s -  t r i e s w i t n e s s an i n c r e a s i n g degree o f t e c h n o l o g i c a l s o p h i s t i c a t i o n as y e a r s go by.  In the l a t e r y e a r s of an i n d u s t r y ' s  life,  the  technological  Optimum s i z e means the most e f f i c i e n t o f a l l s c a l e s t h a t a f i r m can b u i l d .  - 18  -  advances would t y p i c a l l y become l e s s s i g n i f i c a n t . c o s t s to be more d i f f i c u l t enter  t o r e d u c e . . Many new  T h i s would cause u n i t  p r o d u c t s and  services  t h e o l d e r i n d u s t r y ' s market, thus l e a d i n g to the d e s i r e by  companies to p a r t i c i p a t e i n the newer r a p i d growth i n d u s t r i e s .  the  older  Older  f i r m s w o u l d t h e r e f o r e be e x p e c t e d t o be a c t i v e i n merger a c t i v i t y . The  i n c r e a s i n g degree o f t e c h n o l o g i c a l s o p h i s t i c a t i o n leads  the need f o r more c a p i t a l - i n t e n s i v e p r o d u c t i o n s p e c i a l i z e d p e r s o n n e l i n the o p e r a t i o n  p r o c e s s e s and  o f the p r o d u c t i o n  more h i g h l y  process.  t e c h n o l o g i c a l s o p h i s t i c a t i o n tends to make l a r g e r c o r p o r a t i o n s a t t r a c t i v e as a s o u r c e o f c a p i t a l and competitive.  to  Thus  very  management n e c e s s a r y to r e m a i n  T h i s would l e a d to a d e s i r e f o r merger or i n t e r n a l growth  a c t i v i t y w i t h i n a young  industry.  I n s m a l l r a p i d l y growing b u s i n e s s e s where t e c h n o l o g i c a l change i s p r o d u c i n g r a p i d p r o d u c t o b s o l e s c e n c e , many f i r m s go b a n k r u p t o r must s e l l out due  t o l a c k o f adequate f i n a n c i n g and m a n a g e r i a l a b i l i t y .  This  p a r t i c u l a r l y t r u e i n i n d u s t r i e s where equipment, f o r example, may s h o r t time and where new  and  same s e r v i c e as c o m p e t i t i o n  I t can  last a  b e t t e r equipment i s n e c e s s a r y to g i v e  the  is offering.  t h e r e f o r e be argued t h a t when t e c h n o l o g i c a l change i s r a p i d  i n a young i n d u s t r y , merger a c t i v i t y would tend to be  Diversification  high.  Factor  D i v e r s i f i c a t i o n i s a magic word i n the b u s i n e s s w o r l d today has  is  been c l o s e l y l i n k e d w i t h r e c e n t  merger a c t i v i t y s i n c e 1945.  s t u d y showed t h a t a l t h o u g h d i v e r s i f i c a t i o n i s a phenomenon of l o n g  A  and recent standing,  - 19 -  t h e r e has  been some a c c e l e r a t i o n i n the movement i n r e c e n t y e a r s .  example, i n a sample o f 111 r a t e o f e n t r y i n t o new 1939,  43.1  The  l a r g e m a n u f a c t u r i n g companies, the a n n u a l  i n d u s t r i a l a c t i v i t y was  i n 1939-1950, and  For  107.8  48.4  i n 1950-1954.  i n the p e r i o d  1929-  1  p r e s e n c e o f the d i v e r s i f i c a t i o n d e s i r e a f f e c t s merger a c t i v i t y .  O l d e r f i r m s i n an i n d u s t r y , to ward o f f the c o n t i n g e n c y o f  decreasing  p r o f i t margins i n main p r o d u c t l i n e s , w i l l c o n s t a n t l y seek to e n t e r merger a c t i v i t y w i t h r a p i d growth i n d u s t r i e s .  A l s o many f i r m s  into  that  s u r v i v e the e a r l y r a p i d growth o f an i n d u s t r y , w i l l d e s i r e to d i v e r s i f y t o s t a b i l i z e e a r n i n g s and  sales.  T h i s a c t s as p r o t e c t i o n a g a i n s t  i n t o t a l e a r n i n g s t h a t can r e s u l t from u n p r e d i c t a b l e  The  d e s i r e f o r d i v e r s i f i c a t i o n has  twenty y e a r s , and Industry  changes i n the economy.  grown q u i t e r a p i d l y i n the  t h e r e a r e no s i g n s o f i t s u b s i d i n g w e l l i n t o the  L i f e Cycle  The  declines  industry l i f e cycle hypothesis  s t a g e and  future.  Factor  s t a t e s t h a t most i n d u s t r i e s go  t h r o u g h f a i r l y w e l l d e f i n e d s t a g e s o f development--the e a r l y s t a g e , maturity  last  the s t a g e o f d e c l i n e .  the  Each s t a g e i s c h a r a c t e r i z e d  by  c e r t a i n c o n d i t i o n s which p r e v a i l . One describes  o f the f i r s t exponents o f the i n d u s t r i a l l i f e c y c l e c o n c e p t , the e a r l y s t a g e as one  of r a p i d l y expanding demand, numerous  o p p o r t u n i t i e s f o r l a r g e p r o f i t s , and v e n t u r e c a p i t a l e n t e r i n g the  field.  ^"Michael Gord, " D i v e r s i f i c a t i o n and I n t e g r a t i o n i n A m e r i c a n I n d u s t r y , " ( P r i n c e t o n N.J.: P r i n c e t o n U n i v e r s i t y P r e s s , 1962), r e p o r t e d i n W i l l i a m W. A l b e r t a and J o e l E. S e g a l l , The C o r p o r a t e Merger, The U n i v e r s i t y o f C h i c a g o P r e s s , 1966, p. 32.  -  Competition normally, m o r t a l i t y i s h i g h , and success.^"  2  0  -  though not a l w a y s , i s r i f e . surviving corporations  And  as a r u l e , b u s i n e s s  l a y the f o u n d a t i o n  A c o n c o m i t a n t o f r a p i d l y expanding demand i n a young i n d u s t r y  is u s u a l l y a high r i s k of bankruptcy. i n d u s t r y , i t was  In a d e s c r i p t i o n o f the a u t o m o b i l e  shown t h a t between 1900 and  1908 more than 500 a u t o m o b i l e  companies went out of b u s i n e s s e i t h e r by b a n k r u p t c y or merger. 76 companies were a c t i v e i n the i n d u s t r y , but 10 produced o f the t o t a l o u t p u t .  h e l p c u l t i v a t e market g r o w t h .  rush  i n t o c a p i t a l i z e on and  A f t e r much merger a c t i v i t y , b a n k r u p t c y  i n t e r n a l g r o w t h , a r e l a t i v e l y few  firms take over a f a i r l y  o f a young i n d u s t r y ' s t o t a l volume o f  and  three-quarters  f i r m demonstrates t h a t a s o l i d demand e x i s t s  f o r a p r o d u c t o r s e r v i c e , many i m m i t a t o r s  maturity  By 1917,  2  T y p i c a l l y , when one  The  for  and  large percentage  business.  s t a g e i s c h a r a c t e r i z e d by a l e v e l l i n g o f f o f demand  a growth r a t e l e s s t h a n i n the e a r l y s t a g e .  The  r e l a t i v e l y few  firms  t h a t are c o n t r o l l i n g the l a r g e p e r c e n t a g e o f the i n d u s t r y ' s b u s i n e s s a t t h i s p o i n t have e s t a b l i s h e d a s t r o n g f i n a n c i a l p o s i t i o n . have now been i n o p e r a t i o n  These f i r m s  l o n g enough t o have e s t a b l i s h e d a performance  r e c o r d w h i c h g i v e s them a c c e s s to bank f i n a n c i n g and  t o the  external  c a p i t a l market a t l e a s t t o a l i m i t e d degree.  ^"Julius G r o d i n s k y , I n v e s t m e n t s , (New p.  Y o r k : Ronald P r e s s Co.,  1953),  64. 2  Herman E. K r o o s e , A m e r i c a n Economic Development (New York: P r e n t i c e H a l l , I n c . , 1955), pp. 357-369. r e p o r t e d i n Jerome B. Cohen and Edward D. Z i n b a r g , Investment A n a l y s i s and P o r t f o l i o Management ( R i c h a r d I r w i n , I n c . , ) 1967, p. 251.  - 21 The  mature s t a g e t y p i c a l l y c a l l s f o r a new k i n d o f emphasis on  competing more e f f e c t i v e l y . seek t o f i n d c o s t r e d u c i n g  As t h i s p h i l o s o p h y techniques.  takes h o l d , f i r m s  will  As t h e i n d u s t r y becomes more  automated o r c a p i t a l i n t e n s i v e , t h e r e i s a g r e a t e r d e s i r e t o p r o t e c t i n v e s t m e n t s t h r o u g h b e t t e r c o n t r o l o v e r markets and s u p p l y  large  o f raw m a t e r i a l s .  T h i s s t a g e w i l l b r i n g v e r t i c a l and h o r i z o n t a l u n i f i c a t i o n s t o a c h i e v e lower c o s t s and c o n t r o l .  The o p p o r t u n i t i e s t o reduce c o s t s and expand markets  e v e n t u a l l y become fewer and f e w e r .  F i r m s a r e now e n t e r i n g t h e s t a g e o f  d e c l i n e w h i c h i s c h a r a c t e r i z e d by reduced p r o f i t a b i l i t y on e x i s t i n g product  lines.  F i r m s e n t e r i n g t h e s t a g e o f d e c l i n e would t y p i c a l l y e n t e r philosophy  into a  o f e x t e n d i n g t h e i r l i f e t h r o u g h merger w i t h more p r o f i t a b l e  business ventures.  I t i s h i g h l y l i k e l y that firms entering the d e c l i n e  s t a g e would have more l i q u i d a s s e t s  than i n e a r l i e r stages.  I n an attempt  t o f o r e g o t h e s t a g e o f d e c l i n e , t h e s e f i r m s would seek t o d i v e r s i f y  into  the f i e l d s o f r a p i d growth i n d u s t r i e s through merger. T h i s a n a l y s i s p o i n t s o u t t h a t t h e i n d u s t r y l i f e c y c l e w i l l p l a y an i m p o r t a n t r o l e i n the amount and type o f merger a c t i v i t y t h a t w i l l place.  take  F o r example, i n t h e e a r l y s t a g e t h e r e would be many mergers o f  l a r g e r dominant f i r m s p u r c h a s i n g smaller firms.  f i n a n c i a l l y weak and/or p o o r l y managed  The s t a g e o f d e c l i n e would w i t n e s s d i v e r s i f i c a t i o n i n t o  h i g h growth i n d u s t r i e s t o p r o l o n g  the l i f e o f the a c q u i r i n g f i r m .  22  -  Management  One  -  Factor  o f the major f a c t o r s l e a d i n g to a h i g h l e v e l o f merger  activity,  e s p e c i a l l y during  the r a p i d growth s t a g e o f development, i s the manage-  ment f a c t o r .  initial  The  p r o p u l s i o n of a s m a l l f i r m i s s u p p l i e d by  s p e c i f i c a b i l i t y o f the owner--entrepreneur--manager. s a l e s m a n , t e c h n i c i a n o r a good p r o d u c t i o n man.  the dynamic f o r c e o f one  The  individual.  'awkward age'  As  be t h a t he cannot work responsibilities  i s r e a c h e d , the owner may  t a k e s a f u l l range o f m a n a g e r i a l a b i l i t i e s f i r m s a r e l i k e l y t o merge w i t h o t h e r and weaknesses.  i t is small.  s  v e r y n a t u r e o f an e n t r e p r e n e u r may  When the  may  'awkward age' when more i s needed than  c l o s e l y w i t h o t h e r dynamic p e r s o n n e l nor d e l e g a t e others.  be a good  H i s narrow a b i l i t i e s  be a l l t h a t the f i r m needs to be s e l f - s u f f i c i e n t w h i l e a f i r m grows i n s i z e , i t r e a c h e s an  He may  the  to s u c c e e d .  As  to  r e a l i z e that i t a r e s u l t , such  f i r m s w h i c h complements  strengths  More t y p i c a l l y , such a f i r m would s e l l out t o l a r g e r  f i r m s w h i c h can o f f e r the n e c e s s a r y m i s s i n g  abilities.  W e l l managed  f i r m s o f t e n l o o k upon t h e i r p o o r l y managed a s s o c i a t e s as e x c e l l e n t o p p o r t u n i t i e s to a c q u i r e p r o p e r t y  at a b a r g a i n  and  to earn a quick  return  on i t s m a n a g e r i a l s k i l l .  Financial  Factor  A l t h o u g h a f u n c t i o n o f m a n a g e r i a l a b i l i t y , many s m a l l e x p e r i e n c e f i n a n c i a l problems as they grow. has  i t s own  s p e c i a l f i n a n c i a l problems.  i n v e n t o r y , a c c o u n t s r e c e i v a b l e and  The  firms  growth o f a b u s i n e s s  As s a l e s i n c r e a s e , so does  cash r e q u i r e m e n t s .  The  necessary  -  23  cash t o r u n an expanding b u s i n e s s may  -  come f r o m p r o f i t s or from  borrowing.  In the r a p i d growth s t a g e o f a b u s i n e s s , p r o f i t s a r e l i k e l y to be s m a l l f o r many f i r m s and b o r r o w i n g put on e a r n i n g s r e c o r d s .  difficult  due  I f the management does not a l l o w  f o r f i n a n c i n g r e p l a c e m e n t and e x p a n s i o n i n a squeeze.  to the f a i t h bankers u s u a l l y adequately  needs, the f i r m w i l l f i n d  itself  I n most c a s e s , a f i r m must s e l l o u t , go b a n k r u p t o r t r y  public financing.  T h i s f i n a n c i a l f a c t o r l e a d s to many mergers i n the r a p i d growth s t a g e o f an i n d u s t r y .  Many f i r m s i n the e a r l y s t a g e o f the l i f e c y c l e  can o n l y too c l e a r l y see the t h r e a t they f a c e u n l e s s they have a c c e s s  to  s u f f i c i e n t l y l a r g e p o o l s o f c a p i t a l to p e r m i t them to take advantage o f expanding h o r i z o n s i n t h e i r business--horizons presumably can see a l s o .  that t h e i r  competitors  As a r e s u l t , many f i r m s a r e anxious  as to f r e e themselves o f f i n a n c i a l r e s t r i c t i o n s  that prevent  to s e l l  so  future  expansion.  Sympathetic Factor T h i s p s y c h o l o g i c a l f a c t o r i s one  p a r t i c u l a r i l y r e l e v a n t to the  s n o w b a l l i n g e f f e c t w h i c h tends to i n c r e a s e merger a c t i v i t y once i t has s t a r t e d w i t h i n an i n d u s t r y .  T h i s f a c t o r i s based on a r e a c t i o n to  remain c o m p e t i t i v e w i t h c o m p e t i t i o n .  Once the f i r s t merger has  taken  p l a c e w i t h i n an i n d u s t r y , many f i r m s tend to j o i n i n the merger wave out o f f e a r o f b e i n g l e f t a t some c o m p e t i t i v e  disadvantage.  In a r e c e n t study o f merger a c t i v i t y i n the U n i t e d S t a t e s r a i l w a y  -  i n d u s t r y , r e f e r e n c e was  24  -  made to t h i s s y m p a t h e t i c r e a c t i o n . ^  Many r a i l w a y s  a p p a r e n t l y j o i n e d the bandwagon out o f f e a r o f b e i n g dwarfed by s u r r o u n d i n g super r a i l w a y s .  A few o f the mergers mentioned  i n t h i s study apparently  would not have t a k e n p l a c e had not t h e r e been a p s y c h o l o g i c a l f e a r o f being l e f t behind  competitively.  The e n v i r o n m e n t a l and i n d u s t r y f a c t o r s i d e n t i f i e d i n t h i s tend t o a c t as f o r c e s w h i c h , depending  chapter  on t h e i r r e l a t i v e s t r e n g t h s , tend  t o be c o n d u c i v e t o merger a c t i v i t y w i t h i n an i n d u s t r y .  In Chapter  IV,  each o f t h e s e f a c t o r s c o n d u c i v e to a c q u i s i t i o n a c t i v i t y i n the Western Canadian T r u c k i n g I n d u s t r y w i l l be d i s c u s s e d .  B e f o r e p r o c e e d i n g to t h i s  d i s c u s s i o n , the next c h a p t e r w i l l document merger a c t i v i t y i n the Western Canadian T r u c k i n g I n d u s t r y and d i s c u s s t r e n d s t h a t are d e v e l o p i n g .  Robert E. G a l l a m o r e , R a i l r o a d Mergers: C o s t s , C o m p e t i t i o n and the F u t u r e O r g a n i z a t i o n o f the American R a i l r o a d I n d u s t r y , H a r v a r d U n i v e r s i t y , 1968, p. 369.  CHAPTER I I I  ACQUISITION ACTIVITY.IN THE WESTERN CANADIAN TRUCKING INDUSTRY  The  primary o b j e c t i v e of t h i s chapter  i s t o document the n a t u r e  of a c q u i s i t i o n a c t i v i t y w i t h i n the t r u c k i n g i n d u s t r y .  More s p e c i f i c a l l y ,  the f i r s t p a r t o f t h i s c h a p t e r w i l l d e f i n e t h e t r u c k i n g i n d u s t r y and d i s c u s s the growth o f t h e i n d u s t r y .  The n e x t p a r t w i l l document the  a c q u i s i t i o n a c t i v i t y t h a t has t a k e n p l a c e and w i l l d i s c u s s the h i s t o r y of intermodal  and conglomerate ownership s e p a r a t e l y .  f o l l o w e d by a d i s c u s s i o n o f t r e n d s tion  T h i s w i l l be  t h a t have developed i n t h i s a c q u i s i -  activity.  The  d o c u m e n t a t i o n o f a c q u i s i t i o n a c t i v i t y w i l l be p r i m a r i l y con-  c e r n e d w i t h the time p e r i o d between 1950 t o 1968. The a c q u i s i t i o n a c t i v i t y o f t e n f i r m s was documented and dated as a c c u r a t e l y as p o s s i b l e . o t h e r a c q u i s i t i o n s , some o f w h i c h o c c u r r e d the t e x t o f t h i s c h a p t e r were o b t a i n e d current l i t e r a t u r e . views w i t h executives The  A few  p r i o r t o 1950, mentioned i n  randomly i n i n t e r v i e w s o r i n  The r e s e a r c h was conducted t h r o u g h p e r s o n a l  inter-  i n the i n d u s t r y and o t h e r knowledgeable p e r s o n s .  sample used was g e n e r a l l y agreed upon by a l l persons i n t e r v i e w e d t o  include a very  l a r g e p e r c e n t a g e o f a l l t h e a c q u i s i t i o n a c t i v i t y t h a t has  taken place i n the i n d u s t r y .  -  26 -  D e f i n i t i o n o f t h e Western C a n a d i a n - T r u c k i n g  Defining  Industry  t h e segment o f t h e t r u c k i n g i n d u s t r y from w h i c h t h e sample  o f f i r m s used i n t h i s t h e s i s were t a k e n i s a d i f f i c u l t t a s k .  This  i s so  because o f t h e heterogenous n a t u r e o f t h e t r u c k i n g i n d u s t r y and t h e l a c k of information  a v a i l a b l e about t h e t o t a l number o f f i r m s i n t h e t r u c k i n g  i n d u s t r y , t h e i r r o u t e a u t h o r i t i e s and t h e n a t u r e o f t h e i r  In g e o g r a p h i c t e r m s , w e s t e r n Canada w i l l be d e f i n e d o f Canada west o f W i n n i p e g .  operations.  as t h a t  Probably the best d e f i n i t i o n a v a i l a b l e f o r  the purposes o f t h i s t h e s i s i s t h a t o f t h e f o r - h i r e t r u c k i n g The  f o r - h i r e t r u c k i n g i n d u s t r y i s concerned p r i m a r i l y w i t h  highway t r a n s p o r t .  part  Such o p e r a t i o n s  or o t h e r t r a n s p o r t a t i o n c e n t e r s  industry.  i n t e r c i t y or  as t h e s e f i r m s c a r r y o u t w i t h i n  cities  a r e almost e x c l u s i v e l y t h e p i c k - u p and  d e l i v e r y s e r v i c e i n c i d e n t a l t o i t s highway o p e r a t i o n .  Private trucking i s  e x c l u d e d from t h i s t h e s i s as i t i s an a l t e r n a t i v e t o f o r - h i r e s e r v i c e w h i c h some m a n u f a c t u r e r s and d i s t r i b u t o r s f i n d b e n e f i c i a l i n terms o f lower c o s t s , b e t t e r s e r v i c e t o customers and f a s t e r s e r v i c e t o o f f - l i n e points .  The contract  f o r - h i r e trucking industry  operations.  i s composed o f b o t h common and  Almost a l l t h e f i r m s s t u d i e d had a t l e a s t a s m a l l  p a r t o f t h e i r b u s i n e s s r e p r e s e n t e d as c o n t r a c t of t h e i r operations those f i r m s who h o l d  were common c a r r i a g e .  while  the bulk  Common c a r r i e r s a r e d e f i n e d as  themselves o u t t o t h e g e n e r a l  the t r a n s p o r t o f p r o p e r t y c a r r i e r s are defined  operations  p u b l i c t o engage i n  over r e g u l a r o r i r r e g u l a r r o u t e s .  as those f i r m s under c o n t i n u i n g  Contract  c o n t r a c t s , w i t h one  o r a l i m i t e d number o f persons o r f i r m s , e i t h e r f o r t h e f u r n i s h i n g o f  -  27  -  t r a n s p o r t a t i o n s e r v i c e s f o r the e x c l u s i v e use  o f each p e r s o n s e r v i c e d  d i s t i n c t s e r v i c e d e s i g n e d t o meet the needs o f v a r i o u s  Growth o f the T r u c k i n g  The t i o n was  customers.^"  Industry  t r u c k i n g i n d u s t r y i s s t i l l r e l a t i v e l y young and  very l o c a l i n nature.  from l i v e r y barn operations i n d u s t r y i n the 1920's and run businesses.  at i t s i n c e p -  D u r i n g the 1920's e n t r e p r e n e u r s s h i f t e d  to t r u c k l i n e s .  Most o f the f i r m s i n the  1930's were p r o p r i e t o r s h i p s , u s u a l l y  D u r i n g the 1940's and  family  1950's, v e r y r a p i d growth i n the  i n d u s t r y w i t n e s s e d the emergence of c l o s e l y h e l d c o r p o r a t i o n s  which  r e l i e d on f i n a n c i n g from a s m a l l number o f w e a l t h y i n d i v i d u a l s . these firms s t i l l y e a r s has  or  e x i s t e d w e l l i n t o the 1960's and  only  i n the l a s t  the i n d u s t r y s t a r t e d t o move i n t o p u b l i c l y h e l d  D u r i n g t h i s t r a n s i t i o n s t a g e i n the 1950's and  1960's, many f i r m s who  base i n r e s p o n s e to c h a n g i n g r e q u i r e m e n t s o f s h i p p e r s . firms expressing  number o f f i r m s r e m a i n i n g as l o c a l o p e r a t i o n s .  few  corporations.  a c c e s s t o s u f f i c i e n t f i n a n c i n g , expanded t h e i r g e o g r a p h i c and  today c o n s i s t s o f r e l a t i v e l y few  Many o f  The  commodity industry  dominance w i t h a  The  had  larger firms  large  are  s t a r t i n g to d e v e l o p a need f o r p u b l i c f i n a n c i n g , s p e c i a l i z e d management and  more c a p i t a l i n t e n s i v e  The  operations.  t r u c k i n g i n d u s t r y from 1938  growth as shown by taken place.  t o 1965  has  undergone v e r y r a p i d  the change i n f r e i g h t t r a n s p o r t a t i o n p a t t e r n s  T a b l e I I i n d i c a t e s t h a t the p e r c e n t a g e share of  t h a t have  ton-miles  ^Canada, Dominion Bureau o f S t a t i s t i c s , Motor C a r r i e r F r e i g h t (Common and C o n t r a c t ) , Ottawa, Queen's P r i n t e r , 1966, p. 6.  -  28 -  TABLE I I INTERCITY TON-MILES PERFORMED IN CANADA BY TYPE OF CARRIER, 1938-1965 ( M i l l i o n s of Ton-Miles) Year  Rail  Road  Water  1938 1945 1950 1955 1956 1960 1961 1962 1963 1964 1965  26,835 63,349 55,538 66,176 78.820 65,445 65,028 67,937 75,796 85,033 87,190  1,515 2,995 7,597 10,248 10,614 13,841 16,099 16,585 16,704 18,181 19,411  24,267 21,994 27.017 34,348 39,406 36.869 39,169 42,720 46,559 54,164 55,063  Air  Oil Pipeline  1 3 8 31 39 43 45 49 54 64 75  -  610 12,302 16,193 17,226 21,483 24,295 26,648 28,072 29,881  Gas Pipeline  -  6,414 9,308 11,710 13,232 15,307 16,955  Total 55,618 88,341 90,770 123,105 145,072 139,838 151,932 163,296 178,993 200,776 208,575  PERCENTAGE DISTRIBUTION 1938 1945 1950 1955 1956 1960 1961 1962 1963 1964 1965  51.0 71.7 61.2 53.8 54.3 46.8 43.3 41.6 43.4 42.4 41.9  2.9 3.3 8.4 8.3 7.3 9.910.6 10.1 9.3 9 .0 9.3  46.1 25.0 29.7 27.9 27.2 26.4 25.8 26.2 26.0 27.0 26.5  -* '  -  -  -  0.7 10.0 11.2 12.3 14.2 14.9 14.9 14.0 14.3  -  -  - •  4.6 6.1 7.2 7.4 7.6 8.1  100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 ioo :o  * L e s s than one- t e n t h o f one p e r c e n t . Source :  Canada, Dominion Bureau o f S t a t i s t i c s , D a i l y Ottawa , Queen's P r i n t e r , 1967.  Bulletin,  Feb. 13,  29  -  -  performed by  the t r u c k i n g i n d u s t r y has  1957.  1957,  Since  ton-mile has  The  to  traffic  remained r e l a t i v e l y s t a b l e w h i l e the a b s o l u t e  volume  made* t h i s advance at the expense o f  E s p e c i a l l y i n the 1950's, t h e r e was  s h i f t e d from r a i l  t h i s s h i f t has  to t r u c k .  t a k e n p l a c e and  a great deal  tending  toward s t a b l e  In f a c t , the r a i l w a y s are s t a r t i n g to  compete more v i g o r o u s l y t o r e g a i n some of the l o s t t r a f f i c . t i m e , p i p e l i n e s and  e s p e c i a l l y a i r f r e i g h t continue  share of t o t a l ton-miles some o f the h i g h v a l u e t h i s market from the  of  I t can be c o n c l u d e d t h a t most o f  the i n d u s t r y i s now  e x p a n s i o n as the economy grows.  moved.  At the same  to t a k e an  increasing  A i r F r e i g h t i n p a r t i c u l a r i s now  t r a f f i c much the same way  capturing  t h a t t r u c k e r s have c a p t u r e d  railways.  Accompanying the r a p i d growth i n volume of f r e i g h t moved by t r u c k i n g i n d u s t r y has  been a t r e n d toward l a r g e r s i z e f i r m s .  i n d i c a t e s t h a t the average s i z e o f f i r m as measured by t o t a l increased  and  increase.  t r u c k i n g i n d u s t r y has  r a i l and w a t e r .  r a p i d l y between 1938  the r e l a t i v e p e r c e n t a g e s h a r e o f t o t a l Canadian f r e i g h t  movement has  continued  increased  by a f a c t o r of two  from 1957  to 1966.  a t t r i b u t e d t o the a c q u i s i t i o n a c t i v i t y t h a t has i n t e r e s t i n g to n o t e t h a t i n 1965, p e r c e n t o f the g r o s s o p e r a t i n g  4.8  Table I I I assets  Some o f the growth can taken p l a c e .  T a b l e IV  the fewest number of  be  It is also  p e r c e n t of the f i r m s o b t a i n e d  revenue r e p o r t e d .  t h a t the l a r g e s t class''" o f c a r r i e r had  the  72.7  illustrates operators  ''"Class I c a r r i e r s w i t h g r o s s o p e r a t i n g revenue o f $500,000 and over Class I I " " " " " $100,000-$499,000 Class I I I " " " " " $20,000-$99,999 C l a s s IV " " " " " under $20,000 S o u r c e : Canada, Dominion Bureau of S t a t i s t i c s , Motor C a r r i e r F r e i g h t (Common and C o n t r a c t ) , Ottawa, Queen's P r i n t e r , 1966, p. 5. 11  11  11  -  30  -  TABLE I I I  TOTAL AND AVERAGE ASSETS AND REVENUES FOR CLASS I AND CLASS I I CARRIERS (COMMON AND CONTRACT) (Thousands o f  Dollars)  Year  Total Assets  Total Revenues  1957  $155,534  $226,434  324  $ 480  $ 699  1958  162,936  245,437  341  478  720  1959  204,313  300,545  390  524  771  1960  218,975  306,243  354  619  865  1961  234,046  325,756  365  666  892  1962  259,350  328*413  382  679  860  1963  282,097  396,833  410  688  968  1964  284,721  421,662  405  703  1,041  1965  503,103  341,384  477  1,050  713  1966  551,584  373,830  548  1,006  682  Source:  Number o f Firms  Average Assets  Canada, Dominion Bureau o f S t a t i s t i c s , Motor C a r r i e r (Common and C o n t r a c t ) , Queen's P r i n t e r , Ottawa.  Average Revenue  Freight  - 31 TABLE IV DISTRIBUTION OF GROSS OPERATING REVENUE BY SIZE OF CARRIER FOR 1964 AND 1965 ALL CARRIERS REPORTING IN 1965 Operating Revenue Millions  Percent 1964 Revenue  Class  Number of Firms  Percent  1  206  4.8  $485.4  72.7  72.0  2  492  11.4  111.0  16.6  15.7  3  1,107  25.2  49.6  7.4  8.4  4  2,528  58.2  22.2  3.3  3.9  4,333  100.0  668.2  100.0  100.0  Total  Source:  Percent  Canada, Dominion Bureau o f S t a t i s t i c s , Motor C a r r i e r F r e i g h t (Common and C o n t r a c t ) , Queen's P r i n t e r , Ottawa, 1965.  -  32  -  but by f a r t h e l a r g e s t amount o f o p e r a t i n g r e v e n u e .  C l a s s I and C l a s s I I  c a r r i e r s i n c r e a s e d t h e i r s h a r e o f t o t a l revenue from 1964 t o 1965.  At  the same t i m e , C l a s s I I I and C l a s s I V c a r r i e r s had a d e c r e a s e d s h a r e o f t o t a l revenues.  T h i s would i n d i c a t e a d i s t i n c t t r e n d toward a h i g h e r  l e v e l o f c o n c e n t r a t i o n i . e . , a fewer number o f f i r m s g a i n i n g a l a r g e r share of t o t a l i n d u s t r y s a l e s .  Growth o f S h o r t and Medium Haul  Trucking  The R o y a l Commission study on t r a n s p o r t a t i o n ' ' ' found t h a t a f t e r a r e l a t i v e l y s l o w growth i n t h e 1920's and 1930's, s h o r t and medium h a u l 2 trucking  expanded r a p i d l y i n the l a t e 1940's and 1950's.  estimated  t h a t o v e r t h r e e - q u a r t e r s o f t h e t r a f f i c w i t h i n a 300 t o 400  m i l e h a u l range was b e i n g moved by t r u c k .  By 1960 i t was  I n t h i s market the r a i l w a y s  were u n d e r g o i n g s e r i o u s c o m p e t i t i v e d i f f i c u l t i e s t o t h e type o f d o o r - t o door s e r v i c e b e i n g o f f e r e d by t h e t r u c k i n g i n d u s t r y . Growth o f Long-Haul T r u c k i n g The growth o f the l o n g - h a u l s e c t o r o f t h e t r u c k i n g i n d u s t r y has been f a i r l y r e c e n t as i t j u s t got i t s s t a r t i n 1950.  Before  1950, poor  highway f a c i l i t i e s and i n a d e q u a t e equipment formed t h e major o b s t a c l e s t o the growth o f t h i s s e c t o r o f t h e i n d u s t r y .  '''D. W. C a r r and A s s o c i a t e s , T r u c k - R a i l C o m p e t i t i o n i n Canada, R e p o r t R e p o r t e d i n the R o y a l Commission on T r a n s p o r t a t i o n , Ottawa, Queen's P r i n t e r , 1962, V o l . I l l , p. 10. 2 S h o r t h a u l i s d e f i n e d as a t r u c k movement w i t h i n the range o f a s i n g l e d r i v e r s o p e r a t i o n (up to 400-500 m i l e s ) . Hauls beyond a 1,500 m i l e range a r e d e f i n e d as s p e c i a l i z e d l o n g - h a u l . Canada, R o y a l Commission on T r a n s p o r t a t i o n , R e p o r t . Ottawa, Queen's P r i n t e r , 1962, V o l . I l l , p.  -33  The  -  growth o f l o n g - h a u l t r u c k i n g was  years of e x i s t e n c e . t r u c k i n g met  not easy i n i t s f i r s t  A f t e r a s h o r t p e r i o d of e a r l y growth, long-haul  s e v e r e c r i s e s , the f i r s t o f w h i c h was  and mouth d i s e a s e i n 1952 l u c r a t i v e back-haul  five  and  1953.  This outbreak  an o u t b r e a k  of foot  s e r i o u s l y a f f e c t e d the  i n d r e s s e d meat t r a f f i c to the E a s t .  Serious res-  t r i c t i o n s were p l a c e d on the movement o f meat t r a f f i c p a r t i c u l a r l y i n e n t e r i n g the U n i t e d S t a t e s as the Trans-Canada Highway was completed.  as y e t  A second c r i s i s o c c u r r e d when the r a i l w a y s i n 1955  r e s t r i c t i o n on m i x i n g LCL"*" t r a f f i c to w e s t e r n Canada.  This  These two events  removed a  permitted  LCL shipments to be mixed i n one c a r so as to o b t a i n the lower rate.  not  s e r i o u s l y a f f e c t e d the p r o f i t s o f the  car-lot long-haul  c a r r i e r c a u s i n g many b a n k r u p t c i e s .  S t a r t i n g i n 1957,  p i g g y b a c k shipments on the r a i l w a y were used by  t r u c k i n g f i r m s as a means o f e x p a n d i n g . of a d d i t i o n a l t r a i l e r s . 1960,  T h i s r e q u i r e d o n l y the purchase  T a b l e V shows t h a t d u r i n g the p e r i o d 1957  the number o f t r a i l e r s c a r r i e d by p i g g y b a c k i n c r e a s e d  to  rapidly.  T h i s r a p i d growth can be a t t r i b u t e d to an i n c r e a s e i n o w n e r s h i p o f t r u c k l i n e s by the r a i l w a y s and c o s t s a v i n g b e n e f i t s f o r the t r u c k i n g f i r m s to s w i t c h t o the use o f p i g g y b a c k s e r v i c e .  Documentation o f A c q u i s i t i o n A c t i v i t y i n the T r u c k i n g  Industry  .The major.growth by a c q u i s i t i o n i n the t r u c k i n g i n d u s t r y has p l a c e s i n c e 1950, w i t h much o f t h i s a c t i v i t y b e i n g i n the  LCL means l e s s - t h a n - c a r l o a d .  long-haul  taken  -  34  -  TABLE V NUMBER OF RAILWAY CARS LOADED I N PIGGYBACK SERVICES IN CANADA 1958-1966  Year  Number o f Cars Loaded P i g g y b a c k  1958  77,109  3,771,000  2.0  1959  133,929  3,843,900  3.5  1960  154,898  3,635,400  4.3  1963  199,416  3,632,559  5.5  1964  223,005  3,928,883  5-7  1965  232,178  3,980,793  5.8  1966  187,587  4,032,983  4.7  Source:  T o t a l Cars Loaded  Piggyback Loading Percent of T o t a l  Canada, Dominion Bureau o f S t a t i s t i c s , C a t a l o g u e Number 52-001, Queen's P r i n t e r , 1966.  -  segment o f the i n d u s t r y .  35  -  S i n c e t h i s development has been so r e c e n t  the number o f f i r m s t a k i n g p a r t i n t h i s a c q u i s i t i o n a c t i v i t y few,  i t was  p o s s i b l e to o b t a i n much o f the h i s t o r y o f t h i s  movement.  T a b l e VI l i s t s  undertaken  by each  The on w e s t e r n  acquisition  the f i r m s s t u d i e d and the a c q u i s i t i o n  activity  one.  pioneered  r o u t e s between w e s t e r n  In the  These f i r m s had p r e v i o u s s h o r t and medium  h a u l o p e r a t i o n s and e x p a n s i o n was f o l l o w t h i s p a t h was i n A p r i l , 1950  and c e n t r a l Canadian p o i n t s .  a t l e a s t two f i r m s i n a u g u r a t e d t r u c k i n g o p e r a t i o n s between  A l b e r t a and c e n t r a l Canada.  to  relatively  e a r l y developments i n l o n g - h a u l t r u c k i n g were m a i n l y  s p r i n g o f 1950  Two  and  r e l a t i v e l y easy.  The  first  f i r m to  M and P T r a n s p o r t L i m i t e d w h i c h began o p e r a t i o n s  i n t e r p r o v i n c i a l l y between A l b e r t a , O n t a r i o and Quebec.  l a t e r a c q u i s i t i o n s e l e v a t e d the s e r v i c e o f M and P T r a n s p o r t L i m i t e d a national scale.  In 1965, M and P T r a n s p o r t L i m i t e d a c q u i r e d  Mountain P a c i f i c L i m i t e d which operated 1966,  from A l b e r t a to Vancouver.  the a c q u i s i t i o n o f C o n t i n e n t a l Express  second f i r m to e n t e r the f i e l d  In  L i n e s L i m i t e d added r o u t e  a u t h o r i t i e s from A l b e r t a to Saskatchewan and O n t a r i o to The  Prairie  was  Manitoba.  Midland Superior  Express  L i m i t e d i n September, 1950, w i t h o p e r a t i o n s i n t e r p r o v i n c i a l l y between A l b e r t a , Saskatchewan, M a n i t o b a ,  O n t a r i o and Quebec.  Two  subsequent  a c q u i s i t i o n s o f East-West T r a n s p o r t L i m i t e d and Empire F r e i g h t w a y s b u i l t up a Trans-Canada r o u t e network. S u p e r i o r Express  The  Limited  l a t e r a c q u i s i t i o n gave M i d l a n d  L i m i t e d r o u t e a u t h o r i t i e s from W i n n i p e g t o Regina  and  i n t r a - p r o v i n c i a l l y i n Saskatchewan to S a s k a t o o n , M e l f o r t , P r i n c e A l b e r t and N o r t h B a t t l e f o r d .  T h i s Trans-Canada r o u t e network a t t r a c t e d Canadian  TABLE V I MAJOR FIRMS I N THE WESTERN CANADIAN TRUCKING INDUSTRY, THEIR HISTORY OF ACQUISITIONS FROM 1950-1969 AND THE ROUTE AUTHORITIES. ACQUIRED Canadian F r e i g h t w a y s L i m i t e d 1967 - Hanson T r a n s p o r t L i m i t e d  -  route a u t h o r i t y i n t r a - p r o v i n c i a l l y w i t h i n O n t a r i o .  1965 - E a s t e r n A s b e s t o s L i m i t e d  -  r o u t e a u t h o r i t y from O n t a r i o to Quebec.  1955 - N o r t h e r n F r e i g h t w a y s L i m i t e d  -  r o u t e a u t h o r i t y from Edmonton i n t o B r i t i s h Columbia t o P r i n c e Rupert and waypoints between P r i n c e Rupert and P r i n c e George.  1950's Canadian  F r e i g h t w a y s was a c q u i r e d by C o n s o l i d a t e d F r e i g h t w a y s L i m i t e d  i  c\ i  1951 - C o n t i n e n t a l C a r r i e r s L i m i t e d  -  r o u t e a u t h o r i t y from Vancouver t o C a l g a r y .  1950 - W i n q u i s t C a r r i e r s L i m i t e d  -  r o u t e a u t h o r i t y from Edmonton to C a l g a r y .  -  r o u t e a u t h o r i t y from Edmonton t o C a l g a r y .  1948 - Harsden K o o l e r T r a n s p o r t Limited 1942 - Canadian  F r e i g h t w a y s was formed from t h e amalgamation o f the f o l l o w i n g two f i r m s :  Chris Transport Limited  -  r o u t e a u t h o r i t y from L e t h b r i d g e t o C o u t t s .  Wilson Freightways L i m i t e d  -  r o u t e a u t h o r i t y from C a l g a r y t o Edmonton.  Canadian Motorways L i m i t e d - S o o - S e c u r i t y Motorways L i m i t e d i s t h e w e s t e r n  division.  1957  - P r a i r i e P a c i f i c Transport Limited  r o u t e a u t h o r i t y from Vancouver t o A l b e r t a .  1957  - Soo F r e i g h t l i n e s L i m i t e d  r o u t e a u t h o r i t y i n t r a - p r o v i n c i a l l y i n Saskatchewan and A l b e r t a  1956  - S e c u r i t y Storage L i m i t e d  r o u t e a u t h o r i t y f r o m W i n n i p e g t o Edmonton and C a l g a r y ,  1955  - Biggar Brothers Limited  r o u t e a u t h o r i t y from W i n n i p e g t o Windsor and T o r o n t o .  Canadian N a t i o n a l T r a n s p o r t a t i o n L i m i t e d 1966  - P i Chapman & Company L i m i t e d  1964  - Husband T r a n s p o r t L i m i t e d  1964  - Toronto-Peterborough Company L i m i t e d  r o u t e a u t h o r i t y throughout t h e Okanagan V a l l e y , t h e C a r i b o o c o u n t r y t o P r i n c e George, Kamloops and R e v e l s t o k e . r o u t e a u t h o r i t y from Windsor through  t o Quebec,  Transport route a u t h o r i t y east o f Hamilton. Limited  r o u t e a u t h o r i t y between Winnipeg, and R e g i n a , North B a t t l e f o r d , Prince A l b e r t , M e l f o r t .  Saskatoon,  1963  - Empire Freightways  1963  - Eastern Transport Limited  1963  - Hoar T r a n s p o r t L i m i t e d  1963  - M i d l a n d S u p e r i o r Express L i m i t e d  r o u t e a u t h o r i t y i n t e r p r o v i n c i a l l y from B.C. i n t o A l b e r t a , Saskatchewan, M a n i t o b a , O n t a r i o and Quebec.  1963  - East-West T r a n s p o r t L i m i t e d  a s u b s i d i a r y o f M i d l a n d S u p e r i o r Express  r o u t e a u t h o r i t y i n t o Nova S c o t i a i n c l u d i n g Cape B r e t o n Island. r o u t e a u t h o r i t y n o r t h o f Toronto  Limited.  Canadian P a c i f i c T r a n s p o r t Company L i m i t e d 1965 - F. W. Loucks T r u c k i n g Limited  Services r o u t e a u t h o r i t y from Vancouver Dawson Creek.  1957 - Smith T r a n s p o r t and S u b s i d i a r i e s Limited 1957 - Expressway Truck L i n e s  t o P r i n c e George and  r o u t e a u t h o r i t y from t h e A t l a n t i c seaboard t o W i n n i p e g . r o u t e a u t h o r i t y from Vancouver to W i n n i p e g .  Limited  t h r o u g h the Okanagan V a l l e y  1948 - F r i t z and A u d e t t e Truck Company Limited  r o u t e a u t h o r i t y from S w i f t C u r r e n t t o R e g i n a .  1948 - D i n s d a l e Cartage and S t o r a g e Limited  r o u t e a u t h o r i t y from Brandon t o Minnedosa. route a u t h o r i t y i n t e r p r o v i n c i a l l y i n t o B r i t i s h Columbia, West Kootenays and i n t r a p r o v i n c i a l l y i n A l b e r t a .  1948 - Dench o f Canada L i m i t e d  1947 - I s l a n d F r e i g h t S e r v i c e s L i m i t e d  -  1947 - O.K. V a l l e y F r e i g h t L i n e s  Limited  Gill  Limited  I n t e r p r o v i n c i a l Truck L i n e s  1967 - Bestway F r e i g h t  Route a u t h o r i t y from Vancouver Vancouver I s l a n d .  t o Nanaimo p l u s a l l o f  r o u t e a u t h o r i t y through t h e Okanagan V a l l e y and i n t o t h e E a s t Kootenays.  r o u t e a u t h o r i t y from M a n i t o b a t o O n t a r i o  Limited  and Quebec.  1966 - P a c i f i c Inland E x p r e s s L i m i t e d  r o u t e a u t h o r i t y from B r i t i s h Columbia t o A l b e r t a , Saskatchewan and M a n i t o b a .  1956 - S o u t h e r n F r e i g h t L i n e s  This a c q u i s i t i o n added r o u t e a u t h o r i t y from O n t a r i o t o B r i t i s h Columbia b u t gave a base o f o p e r a t i o n i n O n t a r i o .  Limited  Johnston Terminals Limited 1966 - S h o r t y ' s T r a n s p o r t L i m i t e d  r o u t e a u t h o r i t y from B r i t i s h Columbia i n t o A l b e r t a , M a n i t o b a .  1966 - West Coast F r e i g h t  r o u t e a u t h o r i t y from Nanaimo t o Duncan, P o r t A l b e r n i , Countney, Campbell R i v e r , Gold R i v e r and Vancouver.  Limited  1962 - Merchants Cartage L i m i t e d  T h i s a c q u i s i t i o n added a heavy h a u l o p e r a t i o n s extends throughout B r i t i s h Columbia.  1962 - B r a y ' s Cartage L i m i t e d  r o u t e a u t h o r i t y from V i c t o r i a to Vancouver.  1962 - Heaney Cartage and S t o r a g e Limited  This a c q u i s i t i o n added a moving and s t o r a g e to the one o f f e r e d i n Vancouver.  which  operation  similar  Kingsway F r e i g h t l i n e s L i m i t e d 1950's Arrow Truck L i n e s  Limited  G o s s e t t and Sons Truck Limited  t h i s a c q u i s i t i o n added a heavy h a u l  CO  operation.  Lines  R i c e and T r i m b l e L i m i t e d  r o u t e a u t h o r i t y from M a n i t o b a t o A l b e r t a . r o u t e a u t h o r i t y from A l b e r t a t o B r i t i s h  Columbia,  M and P T r a n s p o r t L i m i t e d 1965 - P r a i r i e Mountain Limited  Pacific  1966 - C o n t i n e n t a l Express L i n e s Limited  r o u t e a u t h o r i t y from A l b e r t a to Vancouver.  r o u t e a u t h o r i t y from A l b e r t a t o Saskatchewan, to M a n i t o b a .  Ontario  P u b l i c Freightways 1968  1965  1965  Limited  - Coronation Credit Limited  Corporation a conglomerate w h i c h took o v e r f i n a n c i a l c o n t r o l o f P u b l i c Freightways L i m i t e d .  - T and H C a r i b o o T r a n s p o r t Limited  - Haney-Hammond Limited  r o u t e a u t h o r i t y from Vancouver t o Hope, W i l l i a m s and L i l l o o e t s e r v i n g w a y p o i n t s i n between.  Lake  Trucklines r o u t e a u t h o r i t y between C o q u i t l a m and Haney.  1954  - Green Truck L i n e s  Limited  1953  - Stevenson T r u c k l i n e s  1951  - P u b l i c Freightways nine, f i r m s :  Limited  Limited  r o u t e a u t h o r i t y between H a r r i s o n Lake and A g g a s s i z . r o u t e a u t h o r i t y between L a n g l e y and C l o v e r d a l e . formed as a r e s u l t o f t h e amalgamation o f t h e f o l l o w i n g  Anderson F r e i g h t l i n e s L i m i t e d r o u t e a u t h o r i t y between C o q u i t l a m and Haney. C h i l l i w a c k C a r t a g e Company L i m i t e d • r o u t e a u t h o r i t y i n C h i l l i w a c k . C r e s c e n t Beach T r a n s f e r L i m i t e d - r o u t e a u t h o r i t y i n C r e s c e n t Beach a r e a , Hume T r u c k l i n e s L i m i t e d route a u t h o r i t y i n Langley area. Lake F r e i g h t l i n e s L i m i t e d r o u t e a u t h o r i t y between H a r r i s o n Lake and A g g a s s i z . Surrey F r e i g h t l i n e s Limited route authority i n Cloverdale. Vanderspeck T r a n s p o r t a t i o n L i m i t e d • r o u t e a u t h o r i t y from Vancouver t o Hope and P r i n c e t o n , Winton's T r a n s f e r L i m i t e d route authority i n Abbotsford area. W h i t e Rock T r a n s f e r L i m i t e d r o u t e a u t h o r i t y i n White Rock a r e a . Van-Kam F r e i g h t w a y s  Limited  1960  - White Transport  Limited  1960  - Kamloops-Salmon Arm F r e i g h t l i n e s Limited  r o u t e a u t h o r i t y from Kamloops t o Salmon Arm.  r o u t e a u t h o r i t y from Kamloops t o R e v e l s t o k e .  o  - 41 N a t i o n a l T r a n s p o r t L i m i t e d t o a c q u i r e M i d l a n d S u p e r i o r Express  Limited i n  1963. In industry.  t h e n e x t few y e a r s , many o t h e r t r u c k i n g f i r m s jumped i n t o t h e Gill  I n t e r p r o v i n c i a l Truck L i n e s L i m i t e d s t a r t e d o p e r a t i o n s  i n 1952 as a one t r u c k o p e r a t i o n w i t h r o u t e a u t h o r i t y from Vancouver t o Ontario points. Southern  Gill  I n t e r p r o v i n c i a l Truck  Lines L i m i t e d l a t e r a c q u i r e d  F r e i g h t l i n e s L i m i t e d i n 1956. The a c q u i s i t i o n o f t h i s  based f i r m gave G i l l  Toronto  I n t e r p r o v i n c i a l Truck L i n e s L i m i t e d an o v e r l a p p i n g  r o u t e a u t h o r i t y from O n t a r i o t o B r i t i s h Columbia b u t added a base o f operations i n Ontario.  I n 1966, G i l l  a c q u i r e d P a c i f i c I n l a n d Express  I n t e r p r o v i n c i a l Truck Lines L i m i t e d  L i m i t e d w h i c h added r o u t e a u t h o r i t i e s  f r o m B r i t i s h Columbia i n t o A l b e r t a , Saskatchewan and M a n i t o b a .  I n 1967,  Bestway F r e i g h t L i m i t e d was a c q u i r e d a d d i n g t h e m i s s i n g r o u t e a u t h o r i t y between M a n i t o b a , trans-Canada  O n t a r i o and Quebec t o g i v e G i l l  r o u t e network w h i c h p e r m i t t e d s e r v i c e i n t o and out o f a l l  p r o v i n c e s between Quebec and B r i t i s h  In  Interprovincial a  Columbia.  the mid-1950's, S o o - S e c u r i t y T r u c k i n g L i m i t e d was b r o u g h t i n t o  -Canadian Motorways L i m i t e d , a c o n s o l i d a t i o n o f some 52 s m a l l E a s t e r n Canad trucking firms.  S o o - S e c u r i t y Motorways became, t h e Western d i v i s i o n w i t h  i n t e r l i n e hook-up t o t h e E a s t e r n d i v i s i o n a t W i n n i p e g .  Soo-Security  Motorways L i m i t e d i n 1955 a c q u i r e d B i g g a r B r o t h e r s L i m i t e d w h i c h added — r o u t e -author i t y • f rom-W-inn-ipeg -to -Windsor and Toronto . - I n 1956, S e c u r i t y S t o r a g e Limited-was - a c q u i r e d a d d i n g r o u t e a u t h o r i t i e s from W i n n i p e g t o Edmonton and C a l g a r y .  I n 1957, S o o - F r e i g h t l i n e s L i m i t e d was a c q u i r e d  a d d i n g r o u t e a u t h o r i t y i n t r a p r o v i n c i a l l y i n Saskatchewan and i n t e r provincially into Alberta.  To complete t h e f i r m s Trans-Canada r o u t e  -  network, P r a i r i e P a c i f i c Transport  42  r  L i m i t e d was  acquired with  route  a u t h o r i t y from Vancouver to A l b e r t a .  A n o t h e r Trans-Canada f i r m t h a t was was  Kingsway F r e i g h t l i n e s L i m i t e d .  p r o v i n c i a l operation the y e a r 1954.  d e v e l o p e d i n the mid-1950's  T h i s f i r m s t a r t e d as an  intra-  i n O n t a r i o w i t h o p e r a t i n g a u t h o r i t y i n t o Quebec i n  I t i s owned by Canadian Steamships L i m i t e d and  was  e s t a b l i s h e d to complement the p a r e n t companies s h i p p i n g o p e r a t i o n s the G r e a t L a k e s .  Kingsway F r e i g h t l i n e s L i m i t e d s u b s e q u e n t l y expanded  t h e i r truck operations  t o B r i t i s h Columbia through a c q u i s i t i o n s .  T r u c k l i n e s L i m i t e d , p r i n c i p a l l y a heavy h a u l i n g o p e r a t i o n , was The  on  a c q u i s i t i o n of Gossett  and  Sons T r u c k l i n e s L i m i t e d added  a u t h o r i t i e s from M a n i t o b a t o A l b e r t a .  The  Arrow  acquired. route  a c q u i s i t i o n o f R i c e and  Trimble  L i m i t e d completed the t r a n s - C a n a d a r o u t e network by a d d i n g r o u t e a u t h o r i t y f r o m A l b e r t a to Vancouver.  A f i r m which s t a r t e d operations izes i n mainly Maritime  long-haul operations  p o i n t s i s D.  i n 1950  as w e l l and w h i c h s p e c i a l -  from Vancouver to O n t a r i o , Quebec  S. S c o t t T r a n s p o r t  Limited.  and  This f i r m subsequently  a c q u i r e d R e i t m i e r T r u c k l i n e s L i m i t e d w h i c h o p e r a t e d from Vancouver to P r i n c e R u p e r t s e r v i n g w a y p o i n t s west o f and  i n c l u d i n g Vanderhoof.  R e i t m i e r T r u c k l i n e s L i m i t e d , p r i o r to the a c q u i s i t i o n , i n t e r l i n e d l u c r a t i v e f i s h b a c k h a u l to e a s t e r n Canada w i t h D. Competitive  pressure  f o r t h i s t r a f f i c motivated  Canadian F r e i g h t w a y s L i m i t e d has and  Limited.  this acquisition.  developed operations  e a s t e r n Canada t h r o u g h a c q u i s i t i o n . The  i n 1942  S. S c o t t  a  i n western  company came i n t o e x i s t e n c e  w i t h an amalgamation o f C h r i s T r a n s p o r t  L i m i t e d and  Wilson  -  43  Freightways Limited both of A l b e r t a .  -  The newly formed company, Canadian  F r e i g h t w a y s L i m i t e d , had r o u t e a u t h o r i t y from Edmonton s o u t h t o C o u t t s , .Alberta.  Two-small - a c q u i s i t i o n i n 1948,-Harsden K o o l e r  Transport  L i m i t e d w i t h r o u t e a u t h o r i t y between Edmonton and C l a g a r y Transfer  and W i n q u i s t  Limited with a s i m i l a r route a u t h o r i t y , e s t a b l i s h e d the firms  i n t r a p r o v i n c i a l o p e r a t i o n a l base.  I n 1951, C o n t i n e n t a l C a r r i e r s  was a c q u i r e d w i t h r o u t e a u t h o r i t y from Vancouver t o C a l g a r y . a c q u i s i t i o n was.: the f i r m s f i r s t s t e p  Limited  This  into interprovincial trucking.  the e a r l y 1950's, Canadian F r e i g h t w a y s L i m i t e d was a c q u i r e d by  In  Consolidated  F r e i g h t w a y s L i m i t e d , p r e s e n t l y the l a r g e s t t r u c k i n g f i r m i n t h e U n i t e d States.  I n 1955, Canadian F r e i g h t w a y s L i m i t e d a c q u i r e d  Northern Freight-  ways L i m i t e d e x t e n d i n g t h e f i r m s r o u t e a u t h o r i t y from Edmonton i n t o B r i t i s h Columbia s e r v i n g P r i n c e Rupert and w a y p o i n t s between P r i n c e R u p e r t and  P r i n c e George.  Two l a t e r a c q u i s i t i o n s were made i n E a s t e r n  Eastern Asbestos Limited  Canada,  i n 1965 w i t h r o u t e a u t h o r i t y from O n t a r i o t o  Quebec, and Hanson T r a n s p o r t L i m i t e d w i t h r o u t e a u t h o r i t y w i t h i n These l a t e r two a c q u i s i t i o n s have c r e a t e d  a g r e a t d e a l o f s p e c u l a t i o n as  t o when and w i t h whom Canadian F r e i g h t w a y s L i m i t e d w i l l b r i d g e between t h e i r e a s t e r n and w e s t e r n  Ontario.  the gap  operations.  Van-Kam F r e i g h t l i n e s L i m i t e d , a s m a l l i n t r a p r o v i n c i a l f i r m i n . B r i t i s h Columbia, acquired  two s m a l l f i r m s i n r e s p o n s e t o economic  development i n t h e M i c a Dam a r e a .  I n 1960, W h i t e T r a n s p o r t L i m i t e d  r o u t e a u t h o r i t y from Kamloops t o Salmon Arm was a c q u i r e d .  with  I n the same  year,'Kamloops-Salmon Arm F r e i g h t l i n e s L i m i t e d w i t h r o u t e a u t h o r i t y from Kamloops t o R e v e l s t o k e was . a c q u i r e d T v V  -  44 -  Johnston T e r m i n a l s L i m i t e d , s i n c e i t s i n c e p t i o n i n 1913 as a l o c a l h o r s e and buggy o p e r a t i o n , has d e v e l o p e d i n t o a d i v e r s i f i e d -company p r i n c i p a l l y t h r o u g h a c q u i s i t i o n s . Limited c o - o r d i n a t e d  B e f o r e 1962,  service  Johnston Terminals  the s e r v i c e s o f the f o l l o w i n g s u b s i d i a r i e s :  Johnston  National S t o r a g e L i m i t e d , T e r m i n a l C a r t a g e L i m i t e d , W e s t m i n s t e r S t o r a g e ' and  D i s t r i b u t i o n L i m i t e d , Brade S t o r a g e and D i s t r i b u t i o n L i m i t e d , Burke  and  Wood L i m i t e d , Red B a l l L i m i t e d and J . T. S e r i v e L i m i t e d , a l l o p e r a t i n g  in the metropolitan  Vancouver m a r k e t .  J o h n s t o n T e r m i n a l s made s e v e r a l a c q u i s i t i o n a f t e r 1962 t o e n l a r g e the  t e r r i t o r y and commodity base o f o p e r a t i o n s .  I n 1962,  Heaney C a r t a g e  and  S t o r a g e L i m i t e d , a V i c t o r i a based f i r m , gave J o h n s t o n T e r m i n a l s  -Limited a s i m i l a r moving and s t o r a g e  operation  Vancouver.  L i m i t e d o f V i c t o r i a was a c q u i r e d  I n 1962,  Bray's Transfer  to that which e x i s t e d i n  adding r o u t e a u t h o r i t y between Vancouver and V i c t o r i a . C a r t a g e L i m i t e d was a l s o a c q u i r e d  i n 1962,  which o p e r a t e s t h r o u g h o u t t h e p r o v i n c e  Merchants  a d d i n g a heavy h a u l  o f B r i t i s h Columbia.  service  Johnston  T e r m i n a l s L i m i t e d made one o t h e r a c q u i s i t i o n i n 1962. T h i s was o f Transco Services and  L i m i t e d w h i c h expanded t h e s e r v i c e o f f e r e d i n t o C a l g a r y ,  Winnipeg.  was a c q u i r e d  I n 1966,  West Coast F r e i g h t L i m i t e d ^ ' a  Edmonton  Nanaimo based f i r m  t o round o u t s e r v i c e on Vancouver I s l a n d .  This a c q u i s i t i o n  added r o u t e a u t h o r i t i e s from Nanaimo t o Duncan, P o r t A l b e r n i , C o u r t e n a y , Campbell R i v e r , Gold R i v e r and Vancouver.  Also  of S h o r t y ' s T r a n s p o r t L i m i t e d , added a g e n e r a l  i n 1966,  the a c q u i s i t i o n  f r e i g h t route  between B r i t i s h Columbia t o A l b e r t a and M a n i t o b a .  authority  -  45  -  I n t e r m o d a l Ownership  S i n c e t h e l a t e 1940's t h e r e has been much a c t i v i t y s h i p o f t r u c k i n g f i r m s by o t h e r modes o f t r a n s p o r t a t i o n .  i n t h e ownerThe f i r s t  r a i l w a y e n t e r e d i n t o t h e t r u c k i n g i n d u s t r y i n t h e l a t e 1940's b u t most o f t h e r a i l w a y ownship came i n t h e mid 1950's.  Canadian Steamships  L i m i t e d e n t e r e d t h e t r u c k i n g i n d u s t r y by a c q u i r i n g Kingsway F r e i g h t l i n e s Limited  i n t h e mid 1950's.  Recently,  P a c i f i c Western A i r l i n e s has pur-  chased a s m a l l t r u c k i n g f i r m i n A l b e r t a . expected to u t i l i z e  R e g i o n a l a i r l i n e s c o u l d be  t r u c k s , p r i n c i p a l l y f o r p i c k - u p and d e l i v e r y s e r v i c e ,  much t h e same way as do t h e r a i l w a y s .  Large s h i p p i n g  l i n e s that are  c u r r e n t l y e n t e r i n g c o n t a i n e r i z a t i o n and a complete s h i p p e r - t o - c o n s i g n e e t r a n s p o r t a t i o n p o l i c y , c o u l d be viewed as p o t e n t i a l e n t r a n t s trucking  i n t o the  industry.  C a n a d i a n P a c i f i c T r a n s p o r t Company The  Canadian P a c i f i c R a i l w a y was t h e f i r s t r a i l w a y to e n t e r t h e  trucking field had  acquired  i n 1947. By t h e end o f 1948, t h e Canadian P a c i f i c R a i l w a y  five trucking firms.  were g e o g r a p h i c a l l y  A t t h i s t i m e , the a c q u i r e d  companies  s e p a r a t e d and the f i r s t s e r i o u s attempt t o hook-up  t h e s e s e p a r a t e u n i t s o c c u r r e d i n 1957. The a c q u i s i t i o n o f Expressway Trucklines  Limited  i n 1957 added r o u t e a u t h o r i t i e s from Vancouver t h r o u g h  the Okanagan V a l l e y t o t h e Kootenays a n d . i n t o C a l g a r y and Edmonton. a c q u i s i t i o n hooked-up t h e o p e r a t i o n s and A u d e t t e T r u c k i n g Freight Service  o f Dench o f Canada L i m i t e d ,  This  Fritz  L i m i t e d , O.K. V a l l e y F r e i g h t l i n e s L i m i t e d and I s l a n d  Limited.  In 1957, Smith T r a n s p o r t and S u b s i d i a r i e s L i m i t e d were  acquired  -  46  -  in e a s t e r n Canada making C a n a d i a n P a c i f i c T r a n s p o r t L i m i t e d the t r u c k i n g company l i n k i n g between the two J . W.  Loucks T r u c k i n g  c o a s t s o f Canada.  S e r v i c e L i m i t e d was  acquired.  place.  The  l u c r a t i v e market i n the P r i n c e George a r e a .  and  Dawson Creek.  two major reasons f o r t a k i n g  f i r s t and more o b v i o u s r e a s o n was  t h e r e were a l r e a d y  1965,  This a c q u i s i t i o n  added r o u t e a u t h o r i t y from Vancouver to P r i n c e George and T h i s a c q u i s i t i o n i s i n t e r e s t i n g as i t had  In  first  t o g a i n a c c e s s to The  the  second r e a s o n was  that  f o u r or f i v e t r u c k i n g f i r m s s e r v i n g P r i n c e George  i n s t e a d o f a p p l y i n g f o r a r o u t e a u t h o r i t y from the P u b l i c U t i l i t i e s  Commission, Canadian P a c i f i c T r a n s p o r t found i t e x p e d i t i o u s the a u t h o r i t y .  to purchase  To o b t a i n an a u t h o r i t y from the P u b l i c U t i l i t i e s  Commission, a f i r m must prove p u b l i c c o n v e n i e n c e and n e c e s s i t y .  Because  o f the e x i s t i n g s e r v i c e i n the a r e a at t h i s t i m e , such p r o o f would  be  e x t r e m e l y d i f f i c u l t and would a t t r a c t much o p p o s i t i o n from e x i s t i n g carriers .  Canadian N a t i o n a l Transport The  Limited  Canadian N a t i o n a l R a i l w a y was  a little  slower than i t s r i v a l  i n e n t e r i n g the t r u c k i n g i n d u s t r y on a b i g s c a l e . because o f the d i f f i c u l t y the n e c e s s a r y c a p i t a l .  i n p e r s u a d i n g the F e d e r a l  Presumably t h i s  was  Government to advance  Many t r u c k e r s v o i c e d o p p o s i t i o n to p u b l i c funds  b e i n g used to purchase t r u c k i n g f i r m s t h a t would compete a g a i n s t  private  enterprise.  The i n 1963. was  Canadian N a t i o n a l R a i l w a y f i r s t e n t e r e d The  the t r u c k i n g  f i r s t a c q u i s i t i o n made by the Canadian N a t i o n a l  that of Midland Superior  Express Limited  i n 1963.  industry  Railway  This a c q u i s i t i o n  -  gave r o u t e a u t h o r i t i e s  Canada.  A t t h e same t i m e Canadian N a t i o n a l  L i m i t e d was v e r y a c t i v e I n 1963, Hoar T r a n s p o r t  of the Maritimes  -  from B r i t i s h Columbia i n t o A l b e r t a , Saskatchewan,  M a n i t o b a , O n t a r i o , and Quebec. Transport  47  were a c q u i r e d .  i n acquiring trucking firms i n eastern L i m i t e d o f O n t a r i o and E a s t e r n I n 1964, T o r o n t o - P e t e r b o r o u g h  Company L i m i t e d and Husband T r a n s p o r t  Transport Transport  Limited, both located i n eastern  Canada, were a c q u i r e d .  The  l a s t a c q u i s i t i o n made by Canadian N a t i o n a l T r a n s p o r t  was t h a t o f D. Chapman and Company L i m i t e d .  T h i s a c q u i s i t i o n added  a u t h o r i t y t h r o u g h o u t t h e Okanagan V a l l e y , t h e C a r i b o o c o u n t r y George, Kamloops and R e v e l s t o k e .  Limited route  to P r i n c e  The a c q u i s i t i o n o f D. Chapman and  Company L i m i t e d i s a good example o f a manager-owner who saw b e n e f i t s i n being acquired.  I n a r e c e n t d i s c u s s i o n about t h e r e a s o n s f o r t h e a c q u i s i -  t i o n , t h e owner was concerned about i n c r e a s i n g c o m p e t i t i v e  p r e s s u r e on  the f i n a n c i a l v i a b i l i t y o f t h e f i r m .  A l s o d i s c u s s e d was t h e f a c t  the company would c o n t i n u e  a f t e r t h e a c q u i s i t i o n as a  operations  e n t i t y , and t h a t t h e f i r m had a c c e s s t o more c a p i t a l w h i c h would it  to continue  that separate allow  t o grow and b u i l d new t e r m i n a l s t h a t a r e required.'''  Conglomerate Ownership A v e r y r e c e n t t r e n d has been t h e a t t r a c t i o n o f c o n g l o m e r a t e c o r porations  into the t r u c k i n g i n d u s t r y .  A very  i n t e r e s t i n g case h i s t o r y o f  D. Chapman, P r e s i d e n t and G e n e r a l Manager, D. Chapman and Company L i m i t e d , r e p o r t e d i n an a r t i c l e c a l l e d " P i o n e e r B r i t i s h Columbia F i r m J o i n s C.N.'s Truck F a m i l y , " Motor C a r r i e r , November, 1966, p. 22.  -  a company w h i c h was  -  p u r c h a s e d by such an o r g a n i z a t i o n i s t h a t o f P u b l i c  Freightways Limited. operation  48  P u b l i c F r e i g h t w a y s L i m i t e d , an  i n B r i t i s h C o l u m b i a , was  intraprovincial  formed t h r o u g h amalgamation o f  f i r m s p r i n c i p a l l y l o c a t e d i n the F r a s e r V a l l e y r e g i o n . VI).  1953,  (See. T a b l e  Three s m a l l a c q u i s i t i o n s were s u b s e q u e n t l y made expanding  f u r t h e r i n the F r a s e r V a l l e y r e g i o n . Green T r u c k l i n e s L i m i t e d i n 1954  i n 1965  were  operations  Stevenson T r u c k l i n e s L i m i t e d and  Haney-Hammond T r u c k l i n e s  L i m i t e d , one  o f the o r i g i n a l l y  gamated f i r m s , added r o u t e a u t h o r i t y from Vancouver to Hope and T and  H C a r i b o o T r a n s p o r t L i m i t e d was  a u t h o r i t i e s from Vancouver t o Hope, W i l l i a m s December, 1968, Corporation  P u b l i c F r e i g h t w a y s was  acquired Lake and  g i v e n t o be t o s u p p l y  adding  The  route In  reason f o r  the  a d d i t i o n a l funds needed to f u r t h e r  c o n t r a c t s where s u b s t a n t i a l c a p i t a l i n v e s t m e n t i n new The  amalPrinceton.  Lillooet.  expand P u b l i c F r e i g h t w a y s L i m i t e d , p a r t i c u l a r l y i n b i d d i n g  for larger  equipment i s  r e a s o n f o r c h o o s i n g P u b l i c F r e i g h t w a y s L i m i t e d was  i t i s a w e l l managed company i n an e s s e n t i a l and a solid  Limited  a c q u i r e d by C o r o n a t i o n C r e d i t  L i m i t e d , a conglomerate c o r p o r a t i o n .  a c q u i s i t i o n was  required.  in  acquired.  Vanderspeck T r a n s p o r t a t i o n  I n 1965,  nine  investment o p p o r t u n i t y  growth i n d u s t r y and  growing i n d u s t r y , o f f e r i n g  for Coronation Credit  A p o l i c y of conglomerate c o r p o r a t i o n s  that  Corporation.^  appears to be to e n t e r  then to expand h o r i z o n t a l l y w i t h i n t h a t  a  industry.  W. E. D o n n e l l y , V i c e P r e s i d e n t , C o r o n a t i o n C r e d i t L i m i t e d , r e p o r t e d i n an a r t i c l e c a l l e d " P i o n e e r Coast Employee-owned L i n e - H a u l Now P a r t o f New C o n g l o m e r a t e , " Motor C a r r i e r , December, 1968, p. 11.  49  -  -  In e a r l y 1969,  Coronation Credit Corporation  Transportation  L i m i t e d o f Edmonton, one  bulk carrying firms.  Rempel-Trail  Dawson Creek i n 1943.  The  acquired  Rempel-Trail  o f Western Canada's l a r g e s t  Transportation  company today h a u l s  L i m i t e d was  such wet  and  formed i n  dry  p r o d u c t s as gas  and  and  This a c q u i s i t i o n i s i l l u s t r a t i v e of h o r i z o n t a l  chemicals.  bulk  o i l , s a l t , a s p h a l t , l i m e , f e r t i l i z e r , seed g r a i n spreading  w h i c h can be e x p e c t e d from the c o n g l o m e r a t e f i r m s .  Another conglomerate c o r p o r a t i o n  to e n t e r the t r u c k i n g i n d u s t r y  i s Neon P r o d u c t s o f Canada L i m i t e d , w h i c h , i n September, 1968, Reimer E x p r e s s L i m i t e d o f W i n n i p e g .  A recent  acquired  d i s c u s s i o n showed  the  p o l i c y o f Neon P r o d u c t s o f Canada L i m i t e d to be to move i n t o the i n d u s t r i e s - - t h e food  i n d u s t r y , communications, maintenance,  and  The  transportation.  o b j e c t i v e being  service  broadcasting,  t o d i v e r s i f y i n t o companies  w i t h b e t t e r than average growth p o t e n t i a l . * '  Reimer E x p r e s s L i m i t e d has Calgary  east  r o u t e a u t h o r i t i e s from Edmonton  to Saskatchewan, M a n i t o b a , O n t a r i o  and  Quebec.  s p e c u l a t i o n has been when and w i t h whom would Reimer E x p r e s s expand i t s o p e r a t i o n s  to B r i t i s h C o l u m b i a .  A major Limited  There were o n l y two  firms  w i t h a t t r a c t i v e r o u t e a u t h o r i t y p a t t e r n s , Hunt T r a n s p o r t L i m i t e d Vancouver and has  P. L. P o r t e r T r u c k i n g  r e c e n t l y d i s a p p e a r e d as  Limited of Calgary.  This  .Neon P r o d u c t s o f Canada L i m i t e d  and  of  speculation announced  p l a n s o f a c q u i r i n g Hunt T r a n s p o r t L i m i t e d .  J . A. P a t t i s o n , P r e s i d e n t , Neon P r o d u c t s o f Canada, r e p o r t e d i n an a r t i c l e c a l l e d "Reimer Purchased by Coast-based Conglomerate May A l t e r I n t e r l i n e s , " Motor C a r r i e r , September 1968, p. 15.  -  50  -  Another conglomerate a c q u i s i t i o n f o l l o w e d c l o s e behind two mentioned above.  the f i r s t  Trimac T r a n s p o r t a t i o n L i m i t e d o f C a l g a r y , Canada's  b i g g e s t b u l k p r o d u c t s h a u l e r , was a c q u i r e d by U n i t e d Westburne I n d u s t r i e s L i m i t e d , a M o n t r e a l plumbing and h e a t i n g w h o l e s a l e r .  Trimac T r a n s p o r t a -  t i o n L i m i t e d was formed o u t o f an amalgamation o f f i v e b u l k commodity transporters.  These were H. M. T r i m b l e and Sons L i m i t e d o f C a l g a r y ,  Maccam T r a n s p o r t L i m i t e d o f Moose Jaw, O i l and I n d u s t r y S u p p l i e s L i m i t e d o f W i n n i p e g , M u n i c i p a l Tank L i n e s L i m i t e d o f T o r o n t o , and Westland L i m i t e d o f Vancouver. Limited w i l l  Carriers  The a c q u i s i t i o n by U n i t e d Westburne I n d u s t r i e s  r e s u l t i n a much l a r g e r c o r p o r a t i o n w i t h i n t e r e s t s i n highway  transportation, o i l d r i l l i n g  r e s o u r c e i n d u s t r y and t h e b u i l d i n g and con-  s t r u c t i o n supply i n d u s t r y .  Trends i n the A c q u i s i t i o n A c t i v i t y  Acquisition activity  i n t h e Western Canadian t r u c k i n g i n d u s t r y  s t a r t e d a f t e r World War I I and has been i n c r e a s i n g t o t h e p r e s e n t day. T h i s a c q u i s i t i o n a c t i v i t y a f t e r t h e War o c c u r r e d l a r g e l y i n response t o the r a p i d l y changing  demands o f s h i p p e r s who now d e s i r e d r a p i d ,  door shipments t o v a s t l y l a r g e r g e o g r a p h i c  areas.  door-to-  Most u n i f i c a t i o n s have  been o f the a c q u i s i t i o n t y p e , w i t h o n l y t h r e e n o t a b l e e x c e p t i o n s . e x c e p t i o n s were t h e amalgamation o f f i r m s t o form Canadian L i m i t e d , _ P u b l i c ..Freightways  These  Freightways  L i m i t e d and Trimac T r a n s p o r t a t i o n L i m i t e d .  The a c q u i s i t i o n s t h a t have o c c u r r e d i n the t r u c k i n g i n d u s t r y have tended  t o extend r o u t e a u t h o r i t y and commodity scope o f o p e r a t i o n s .  Most  a c q u i s i t i o n s have been o f a m a r k e t - o r i e n t e d n a t u r e g e n e r a l l y t y p i f i e d by  - 51 -  end-to-end a c q u i s i t i o n s w h i c h can p r o v i d e  shippers  with better  service  to more m a r k e t s .  A n o t h e r major t r e n d has ships . This  been the p r e s e n c e o f i n t e r m o d a l  t r e n d a l o n g w i t h the r e c e n t acted  as a l a r g e s t i m u l u s  t r e n d o f c o n g l o m e r a t e ownership  has  apparently  The  a v a i l a b i l i t y o f c a p i t a l t o c a r r y out e x p a n s i o n p l a n s has  to the a c q u i s i t i o n a c t i v i t y .  l a r g e r o l e i n the a c q u i s i t i o n a c t i v i t y t h a t has  Most o f the a c q u i s i t i o n a c t i v i t y t h a t has l a r g e r f i r m s t a k i n g over s m a l l e r in financial difficulty. t h e most v a l u a b l e authority. provide  owner-  taken  played a  place.  t a k e n p l a c e has  been o f  t r u c k i n g f i r m s , u s u a l l y ones t h a t  In a h i g h p e r c e n t a g e o f the a c q u i s i t i o n s r e c o r d e d ,  a s s e t o f the a c q u i r e d  company has  been the  route  These r o u t e a u t h o r i t i e s a r e a c a r r i e r ' s a u t h o r i z a t i o n  s e r v i c e , and  c a l l y s p e l l e d out.  are  the o w n e r s h i p and  to  extent of t h i s s e r v i c e i s s p e c i f i -  S a l e or t r a n s f e r o f t h e s e r o u t e a u t h o r i t i e s r e q u i r e  r e g u l a t o r y .approval.  I n p r a c t i c a l terms, the o n l y e x p e d i e n t way  for a  c a r r i e r to expand i t s a r e a o f s e r v i c e i s to purchase a d d i t i o n a l e x i s t i n g r o u t e a u t h o r i t i e s , s i n c e an a p p l i c a t i o n f o r a new p u b l i c c o n v e n i e n c e and  necessity.  The  a u t h o r i t y must prove  p u r c h a s e p r i c e o f many a c q u i s i t i o n s  have q u i t e o f t e n r e f l e c t e d the v a l u e o f the r o u t e a u t h o r i t y to an  acquiring  company i n terms o f a premium p a i d .  pattern  may  be more v a l u a b l e  it fits A t any  to one  A p a r t i c u l a r route authority  c a r r i e r than a n o t h e r , depending on how  well  i n t o the e x i s t i n g a u t h o r i t y p a t t e r n o f the a c q u i r i n g company. extent,  the p r i c e p a i d f o r t h e s e a u t h o r i t i e s would be some f u n c t i o n  o f what the a c q u i r i n g f i r m c o u l d e a r n on t h e s e a d d i t i o n a l  routes.  CHAPTER IV  THE IMPORTANCE OF FACTORS INFLUENCING MERGER ACTIVITY IN THE WESTERN CANADIAN TRUCKING INDUSTRY  In Chapter I I , many f a c t o r s l i k e l y t o be r e l e v a n t t o merger a c t i v i t y i n t h e t r u c k i n g i n d u s t r y were d i s c u s s e d i n g e n e r a l terms. o b j e c t i v e o f t h i s chapter these  isolated factors.  environmental  factors.  Environmental  Factors  The p r i m a r y  i s to d i s c u s s s p e c i f i c a l l y the importantance The f i r s t  of  f a c t o r s t o be d i s c u s s e d w i l l be t h e  A c q u i s i t i o n a c t i v i t y has been s t i m u l a t e d by the e n v i r o n m e n t a l f a c t o r s d i s c u s s e d i n Chapter I I .  The b u s i n e s s  c y c l e , l e g a l and economic  d i s t u r b a n c e f a c t o r s have a l l been v e r y c o n d u c i v e  to the a c q u i s i t i o n  a c t i v i t y t h a t has t a k e n p l a c e s i n c e 1945. The f i r s t  f a c t o r t o be d i s -  cussed w i l l be the b u s i n e s s c y c l e .  Business  Cycle Factor  A c q u i s i t i o n a c t i v i t y appears t o have c o i n c i d e d w i t h p e r i o d s o f g e n e r a l economic p r o s p e r i t y as might be expected c u s s i o n i n Chapter I I . presents  Evidence  from the g e n e r a l  o f t h i s i s presented  dis-  i n Table V I I , which  t h e number o f a c q u i s i t i o n s f o r each y e a r s i n c e 1950. Only  a c q u i s i t i o n s w h i c h o c c u r r e d w i t h i n the Western Canadian T r u c k i n g  those  Industry  -  53  -  TABLE V I I ACQUISITIONS WITHIN THE WESTERN CANADIAN TRUCKING INDUSTRY BY YEAR AND FREQUENCY, 1950-1969  Year  Frequency  Year  Frequency  1950  1  1960  2  1951  2*  1961  -  1952  -  1962  4  1953  1  1963  3  1954  1  1964  -  1955  2  1965  4  1956  2  1966  5  1957  3  1967  2  1958  -  1968  3  1959  -  1969  1 (as.  TOTAL *Note:  Source:  36  One t a l l y h e r e r e p r e s e n t s t h e amalgamation o f P u b l i c F r e i g h t w a y s L i m i t e d from 9 s m a l l t r u c k i n g f i r m s .  I n t e r v i e w s conducted by the a u t h o r d u r i n g March, 1969.  -  54  -  as d e f i n e d i n t h i s t h e s i s a r e i n c l u d e d i n T a b l e V I I .  These a c q u i s i t i o n s  were o b t a i n e d from t h e t e n f i r m s i n t e r v i e w e d , p l u s o t h e r a c q u i s i t i o n s randomly l o c a t e d by t h e author d u r i n g the c o u r s e o f t h e f i e l d s t u d i e s . T a b l e V I I i s not a l l i n c l u s i v e , but does i l l u s t r a t e the t i m i n g o f acquisition activity  i n the t r u c k i n g i n d u s t r y .  Between 1950 and 1969 t h e r e have been minor r e c e s s i o n s w h i c h e x i s t e d from J u l y , 1953, t o A u g u s t , 195 4; from J u l y , 1957 t o A p r i l , 1958; and  from May, 1960 t o F e b r u a r y ,  1961.^"  Table V I I evidences  that  i s a notable lessening o f a c q u i s i t i o n a c t i v i t y corresponding  t o the  times o f economic c o n t r a c t i o n s and an i n c r e a s e o f a c q u i s i t i o n f o r p e r i o d s o f economic e x p a n s i o n .  there  activity  Table V I I a l s o i n d i c a t e s that a c q u i s i -  t i o n a c t i v i t y has been i n c r e a s i n g i n i n t e n s i t y from 1950 t o the l a t e 1960's.  T h i s type o f p a t t e r n can i n p a r t be e x p l a i n e d by t h e n a t u r e o f demand i n t h e t r u c k i n g i n d u s t r y .  T h i s demand i s d e r i v e d from t h e demand  f o r consumer goods and raw m a t e r i a l s .  T h i s would i n d i c a t e t h a t e x p e c t a t i o n s  i n t h e t r u c k i n g i n d u s t r y would be c l o s e l y r e l a t e d t o t h e e x p e c t a t i o n s o f the economy g e n e r a l l y .  E x p e c t a t i o n s w o u l d , t h e r e f o r e , be h i g h d u r i n g  p e r i o d s o f economic e x p a n s i o n .  D u r i n g such p e r i o d s o f h i g h  business  e x p e c t a t i o n s , p r o s p e c t i v e a c q u i s i t i o n s i n the t r u c k i n g i n d u s t r y would be v a l u e d h i g h e r than i n p e r i o d s o f economic c o n t r a c t i o n s . _is t h a t o f the conglomerate c o r p o r a t i o n .  A good example  T h i s type o f c o n g l o m e r a t e  a c q u i s i t i o n i s more l i k e l y t o take p l a c e d u r i n g p e r i o d s o f h i g h  1967,  Derek W h i t e , B u s i n e s s p. 237.  Cycles  business  i n Canada, Ottawa, Queen's P r i n t e r ,  -  e x p e c t a t i o n s where t h e a c q u i r e d aid t h e e x p e c t a t i o n s  55 -  trucking f i r m represents  a good investment  o f t h e s t o c k market a r e g e n e r a l l y h i g h a f f o r d i n g t h e  conglomerate c o r p o r a t i o n a f a v o u r a b l e  s t o c k exchange p o s i t i o n .  A n o t h e r a s p e c t o f t h i s a c q u i s i t i o n p a t t e r n a r i s e s from t h e a v a i l a b i l i t y of a c q u i s i t i o n opportunity the b u s i n e s s  cycle.  i n t h e t r u c k i n g i n d u s t r y r e s u l t i n g from  The t r u c k i n g i n d u s t r y c a n be d e s c r i b e d  i n d u s t r y and as such i s open t o a c q u i s i t i o n a c t i v i t y .  as a low margin  Because o f low  p r o f i t s f o r i n t e r n a l e x p a n s i o n and g e n e r a l l y poor c r e d i t a v a i l a b i l i t y , a s l i g h t n a r r o w i n g o f t h e gap between revenues and expenses c o u l d produce a s h a r p l y reduced p r o f i t p o s i t i o n .  T h i s c h a r a c t e r i s t i c has made t h e t r u c k i n g  i n d u s t r y one w h i c h i s v e r y s e n s i t i v e t o changes  i n volume o f t r a f f i c  r e s u l t i n g from changes  The r e s u l t i s t h a t many  i n business  conditions.  p o o r l y f i n a n c e d and managed t r u c k i n g f i r m s r u n i n t o c o m p e t i t i v e  difficulty  as t h e n e x t p a r a g r a p h e x p l a i n s .  Most o f t h e a c q u i s i t i o n s s t u d i e d were ones c h a r a c t e r i z e d by l a r g e r , more dominant culty.  f i r m s a c q u i r i n g s m a l l e r f i r m s w h i c h were i n f i n a n c i a l  One e x e c u t i v e  i n t e r v i e w e d s t a t e d t h a t a l l t h e a c q u i s i t i o n s made  by h i s f i r m were o f f i r m s i n f i n a n c i a l d i f f i c u l t y r e s u l t i n g m a i n l y their inability  t o s u r v i v e minor r e c e s s i o n s . *  serious depressions  diffi-  Such r e c e s s i o n s  from  caused  i n t h e s m a l l e r f i r m s ' p r o f i t streams and t y p i c a l l y  s e r i o u s l y c u r t a i l e d expenditures  on equipment  petitive .  C o n f i d e n t i a l , personal  i n t e r v i e w , 1969  n e c e s s a r y t o remain com-  -  The  56  -  n a t u r e o f t h e b u s i n e s s c y c l e i s v e r y i n f l u e n t i a l t o t h e amount  of a c q u i s i t i o n a c t i v i t y i n the t r u c k i n g industry.  D u r i n g r e c e s s i o n s , many  t r u c k i n g f i r m s have tended t o become a v a i l a b l e f o r s a l e o r have gone bankrupt.  D u r i n g t h e e n s u i n g economic e x p a n s i o n p e r i o d , b u s i n e s s expec-  tations increase  and t h e l a r g e r t r u c k i n g f i r m s f i n d those f i r m s i n  f i n a n c i a l and c o m p e t i t i v e  d i f f i c u l t y very a t t r a c t i v e a c q u i s i t i o n s ,  e s p e c i a l l y i f they possess a t t r a c t i v e r o u t e a u t h o r i t i e s .  ' Legal  Factor  I n Chapter I I t h e l e g a l f a c t o r was shown t o be v e r y The  influential.  t r u c k i n g i n d u s t r y has a somewhat u n i q u e l e g a l environment as compared  t o many o t h e r i n d u s t r i e s , b u t one w h i c h has been v e r y c o n d u c i v e t o t h e a c q u i s i t i o n a c t i v i t y w h i c h has t a k e n The  place.  t r u c k i n g i n d u s t r y has l o n g been r e g a r d e d as a f f e c t e d  p u b l i c i n t e r e s t and i n the common good. a t t r a c t much r e g u l a t o r y  interest with  The t r u c k i n g i n d u s t r y began t o  i t s r a p i d growth i n t h e 1940's and  e a r l y 1950's, e s p e c i a l l y i n i n t e r p r o v i n c i a l l o n g - h a u l  operations.  f i r s t s i g n i f i c a n t r e g u l a t i o n appeared i n t h e t r u c k i n g i n d u s t r y 1930's, l e a d i n g t o t h e p r e s e n t r e g u l a t o r y  The province  The  i n the  system.  p r e s e n t s t a t u s o f r e g u l a t i o n i n t h e t r u c k i n g i n d u s t r y has each  i n Canada r e s p o n s i b l e  f o r r e g u l a t i o n o f that p o r t i o n o f the  t r u c k i n g i n d u s t r y that f a l l s w i t h i n i t s p r o v i n c i a l boundaries . province,  with  Each  as a r e s u l t o f t h e 1954 Motor V e h i c l e T r a n s p o r t A c t , has r e g u -  l a t o r y powers over i n t e r p r o v i n c i a l t r u c k i n g .  I n 1967, t h e F e d e r a l  Govern-  ment d e c i d e d t o b r i n g t h e r e g u l a t i o n o f a l l forms o f t r a n s p o r t a t i o n under n a t i o n a l p o l i c y i n t h e form o f t h e N a t i o n a l T r a n s p o r t a t i o n  Act. A l l  -57.-  p a r t s o f the N a t i o n a l T r a n s p o r t a t i o n  A c t have s i n c e been implemented  e x c e p t f o r the p a r t c o n c e r n i n g i n t e r p r o v i n c i a l t r u c k i n g and pipelines.  At p r e s e n t ,  solids  t h e r e f o r e , the r e g u l a t i o n o f i n t e r p r o v i n c i a l  t r u c k i n g i s s t i l l under s e p a r a t e p r o v i n c i a l government r e g u l a t o r y  The  p r o v i n c i a l r e g u l a t o r y b o d i e s have a c c e p t e d r e g u l a t i o n o f  t r u c k i n g i n d u s t r y to v a r y i n g degrees w i t h A l b e r t a c h o o s i n g not at a l l .  bodies.  B r i t i s h C o l u m b i a , on the o t h e r hand, i s one  l a t e d provinces.'''  to  the  regulate  of the b e t t e r r e g u -  In B r i t i s h C o l u m b i a , t h r o u g h the P u b l i c U t i l i t i e s  Commission, a l l t h a t i s n e c e s s a r y f o r a c q u i s i t i o n s to be approved i s f o r the a c q u i r i n g c a r r i e r to submit an a p p l i c a t i o n f o r t r a n s f e r .  This  is  g e n e r a l l y approved i f no b a s i c changes i n the q u a l i t y of s e r v i c e o f f e r e d i s t o r e s u l t from the a c q u i s i t i o n . a c q u i r i n g f i r m must get a p p r o v a l i s a f f e c t e d by an a c q u i s i t i o n . The  1967  For  from each p r o v i n c i a l r e g u l a t o r y body  the above d e s c r i b e d  who  2  National Transportation  t i o n Commission a p p r o v a l  i n t e r p r o v i n c i a l t r a n s f e r s , the  A c t r e q u i r e s Canadian  o f a l l t r a n s p o r t a t i o n mergers.  p r o v i n c i a l regulations represents  Transporta-  This along  with  the l e g a l r e s t r i c -  t i o n imposed on the t r u c k i n g i n d u s t r y as to c o n t r o l l i n g a c q u i s i t i o n activity. activity  There has  n e v e r been a case to c l a r i f y whether a c q u i s i t i o n  i n the t r u c k i n g i n d u s t r y must comply to the F e d e r a l  A n t i t r u s t D i v i s i o n or  Government  not.  John Munroe, The H i s t o r y o f Motor C a r r i e r T r a n s p o r t a t i o n U n p u b l i s h e d M.B.A. T h e s i s , I n d i a n a U n i v e r s i t y , 1965.  i n Canada,  2  P e r s o n a l I n t e r v i e w , A. F i t c h , A d m i n i s t r a t i v e A s s i s t a n t and I n s p e c t o r , P u b l i c U t i l i t i e s Commission, B r i t i s h C o l u m b i a , 1969.  Chief  -  58  -  The o b j e c t i v e o f r e g u l a t i o n - i n the t r u c k i n g i n d u s t r y i s to encourage s t a b i l i t y of r a t e s , p r e v e n t i o n of d i s c r i m i n a t i o n , f i n a n c i a l and s t a b i l i t y and d e p e n d a b i l i t y o f s e r v i c e .  In Canada and  responsibility the U n i t e d  S t a t e s , t h e s e o b j e c t i v e s a r e b e i n g sought through r e s t r i c t i o n o f e n t r y and t h e r e s u l t i n g i n c r e a s e i n the average s i z e o f f i r m i n the i n d u s t r y . A t r u c k i n g f i r m can o n l y expand i t s o p e r a t i o n s through r o u t e  extensions  or a c q u i r i n g other t r u c k i n g firms w i t h a t t r a c t i v e route a u t h o r i t i e s .  I n the U n i t e d S t a t e s , the I n t e r s t a t e Commerce Commission r e l u c t a n t l y g r a n t s r o u t e e x t e n s i o n s , s i n c e they have adopted the p h i l o s o p h y t h a t adequate s e r v i c e e x i s t s p r e s e n t l y and the presence  o f an a d d i t i o n a l  would produce r e s u l t s h a r m f u l to e x i s t i n g c a r r i e r s as w e l l as t o carriers.  carrier  new  T h i s p r a c t i c e has c r e a t e d a c l i m a t e f o r an i n c r e a s i n g amount  o f a c q u i s i t i o n a c t i v i t y , s i n c e i t i s the most e x p e d i e n t means by w h i c h a f i r m can expand.  In Canada the s i t u a t i o n a p p e a r s , r e s e m b l e t h a t i n the U n i t e d S t a t e s .  at l e a s t i n p r a c t i c e , t o c l o s e l y  A f i r m can expand e i t h e r  through  a p p l i c a t i o n f o r r o u t e e x t e n s i o n i n the r e g u l a t e d p r o v i n c e s or can purchase a r o u t e a u t h o r i t y through a c q u i s i t i o n . l a t o r y board extension.  appears to f i n d  In B r i t i s h C o l u m b i a , the  i t d e s i r o u s to r e f u s e r e q u e s t s f o r r o u t e  A s p e c i f i c example o f t h i s p r a c t i c e o c c u r r e d  a l l seven r e q u e s t s f o r r o u t e e x t e n s i o n s were refused.''"  i n 1962, An  when  existing  t r u c k i n g f i r m can o b t a i n more c a p a c i t y by p u r c h a s i n g another o f g o i n g through  regu-  firm instead  the tough p r o c e s s o f a p p l y i n g f o r a r o u t e a u t h o r i t y ,  B r i t i s h Columbia P u b l i c U t i l i t i e s Commission A n n u a l V i c t o r i a , Queen's P r i n t e r , 1962.  Report,  -  p r o v i n g p u b l i c convenience  59  -  and n e c e s s i t y , and then competing w i t h e x i s t i n g  firms for t r a f f i c . The  l e g a l environment o f the t r u c k i n g i n d u s t r y d i f f e r s from t h a t  i n most o t h e r i n d u s t r i e s i n t h a t i t i s r e g u l a t e d a t p r e s e n t by p r o v i n c i a l government b o d i e s .  separate  These r e g u l a t o r y b o d i e s , w i t h the A l b e r t a  Highway T r a f f i c Board b e i n g the most o b v i o u s e x c e p t i o n , tend t o f a v o u r a c q u i s i t i o n a c t i v i t y i n an attempt as p r e s e n t e d above.  to a c h i e v e the o b j e c t i v e s o f r e g u l a t i o n  This l e g a l environmental f a c t o r i s , t h e r e f o r e , very  i m p o r t a n t i n c r e a t i n g the a c q u i s i t i o n a c t i v i t y documented i n Chapter I I I . U n l e s s a d i f f e r e n t p o l i c y i s adopted  by the F e d e r a l Government, when they  implement the s e c t i o n o f the N a t i o n a l T r a n s p o r t a t i o n A c t d e a l i n g w i t h the t r u c k i n g i n d u s t r y , t h i s l e g a l f a c t o r s h o u l d p e r p e t u a t e the a c q u i s i t i o n a c t i v i t y w e l l i n t o the  future.  Economic D i s t u r b a n c e F a c t o r The o c c u r r e n c e o f economic d i s t r u b a n c e s has had a v e r y i n f l u e n c e o f the t i m i n g o f a c q u i s i t i o n a c t i v i t y . end o f World War  important  For example, a t the  I I t h e r e e x i s t e d c o n d i t i o n s w h i c h were v e r y  to a c q u i s i t i o n a c t i v i t y .  S h o r t l y a f t e r the end o f World War  conducive I I there  a h i g h demand f o r the movement o f h i g h l y v a l u e d merchandise through use o f t r u c k s .  The  post-war  p e r i o d was  e x i s t i n g r a i l s e r v i c e , took a l o n g time to r e a c h m a r k e t s .  f a s t , door-to-door was  service.  The  e x p e d i t e d through a c q u i s i t i o n  the  c h a r a c t e r i z e d by a r a p i d l y  i n c r e a s i n g demand f o r many consumer goods and raw m a t e r i a l s w h i c h ,  e x p a n s i o n o f many t r u c k i n g f i r m s was  was  The  through  rapid  d e s i r a b l e t o meet the demand f o r  r a p i d e x p a n s i o n i n t o e x t e n s i v e markets activity.  -  60  -  A c t i n g as c o n s t r a i n t s on t h i s r a p i d e x p a n s i o n were poor road c o n d i t i o n s and poor equipment w h i c h p r e v a i l e d d u r i n g World War I I . Immediately a f t e r t h e War, highway t r a c t o r s d i d n o t have t h e power o r t h e endurance f o r l o n g - h a u l o p e r a t i o n s . weak and l i g h t payloads  Highways b e f o r e 1950 were s t r u c t u r a l l y  made l o n g - h a u l t r u c k i n g o p e r a t i o n s b e f o r e t h i s  time  appear u n p r o f i t a b l e . World War I I s u p p l i e d r e l i e f t o the equipment problem i n t h a t t h e d i e s e l e n g i n e was developed Canadian T r u c k i n g I n d u s t r y . machine c a p a b l e  and l a t e r i n t r o d u c e d t o the Western  The d i e s e l e n g i n e gave t h e i n d u s t r y a dependable  of long-hauls.  New and l i g h t e r m e t a l s , developed  during  the War, p e r m i t t e d l a r g e r and l i g h t e r t r a i l e r s and l a r g e r p a y l o a d s .  By 1950, t h e r e e x i s t e d h i g h e x p e c t a t i o n s o f e a r l y c o m p l e t i o n o f the Trans-Canada highway.  T h i s had a f u r t h e r s t i m u l u s t o the a c q u i s i t i o n  a c t i v i t y e s p e c i a l l y i n long-haul t r u c k i n g .  As roads became b e t t e r , t h e  markets o f s h i p p e r s and t r u c k e r s b o t h s p r e a d .  To a c h i e v e t h i s  geographic  s p r e a d i n g , many t r u c k i n g f i r m s a c q u i r e d f i r m s w i t h s u i t a b l e r o u t e a u t h o r i ties.  The  l o n g - h a u l segment o f t h e i n d u s t r y responded t o y e t another  disturbance.  A f o r t u i t o u s r a i l s t r i k e i n A u g u s t , 1950, c r e a t e d a p r e s s i n g  demand f o r l o n g - h a u l t r u c k i n g s e r v i c e s . t e s t f o r the i n d u s t r y .  T h i s n i n e - d a y s t r i k e was a n o t a b l e  I t opened t h e door f o r an e x p a n s i o n  of long-haul  t r u c k i n g t h a t o t h e r w i s e p r o b a b l y would have t a k e n y e a r s t o a c c o m p l i s h .  In r e s p o n s e t o the c o n d i t i o n s t h a t e x i s t e d a f t e r World War I I , entrepreneurs of long-haul.  q u i c k l y adapted t h e i r p r i n c i p a l l y l o c a l o p e r a t i o n s t o t h a t F o r most o f t h e e a r l y e n t r e p r e n e u r s  that pioneered the  l o n g - h a u l t r u c k i n g i n d u s t r y and s u r v i v e d t h e e a r l y d i f f i c u l t i e s ,  there  -  61  -  were l a r g e rewards i n t h e form o f r a p i d l y growing volume o f t r a f f i c and large p r o f i t s . by t r u c k e r s . against  S h i p p e r s became aware o f t h e s p e c i a l i z e d s e r v i c e o f f e r e d Shippers a l s o valued the t r u c k e r s  1  s e r v i c e as a hedge  f u t u r e r a i l s t r i k e s t h a t t h r e a t e n e d t o c u t them o f f from t h e i r  markets.  To be a b l e t o meet t h e changing demands o f s h i p p e r s  a f t e r t h e War,  t r u c k i n g f i r m s began t o v a l u e t h e i r r o u t e a u t h o r i t y v e r y h i g h l y . remain c o m p e t i t i v e , the t r u c k e r .  To  the r o u t e a u t h o r i t y became a v e r y i m p o r t a n t i t e m t o  Many f i r m s expanded t h e i r s e r v i c e g e o g r a p h i c a l l y  through  a c q u i s i t i o n i n o r d e r t o take advantage o f e x p l o i t a b l e s i t u a t i o n s t h a t e x i s t e d i n t h e t r u c k i n g i n d u s t r y , e s p e c i a l l y a f t e r World War I I .  Industrial The has  Factors p r o c e e d i n g d i s c u s s i o n p o i n t s out t h a t t h e a c q u i s i t i o n a c t i v i t y  tended t o o c c u r d u r i n g  periods  o f economic e x p a n s i o n .  environment was viewed as a v e r y s t r o n g a c t i v i t y w i t h i n the i n d u s t r y . acquisition activity  f a c t o r i n causing  Many o f t h e c o n d i t i o n s  The l e g a l acquisition  conducive to  i n t h e t r u c k i n g i n d u s t r y were made a v a i l a b l e by World  War I I , the r a i l s t r i k e o f 1950 and t h e b u i l d i n g o f the Trans-Canada Highway .  There a r e many o t h e r f a c t o r s w h i c h were a l s o i n f l u e n t i a l t o the acquisition activity.  These i n d u s t r i a l f a c t o r s tend t o be more s p e c i f i c  c h a r a c t e r i s t i c s o f the t r u c k i n g i n d u s t r y . be Economies o f S c a l e .  The f i r s t  t o be d i s c u s s e d  will  62  -  Economies o f S c a l e F a c t o r  -  •  There was much i n t e r e s t i n t h e e a r l y 1960's about mergers o f r a i l r o a d s , t r u c k i n g companies and o f a i r l i n e s . proposed mergers were supposed t o a c h i e v e , t i a l economies o f s c a l e .  Almost a l w a y s , t h e  among o t h e r  t h i n g s , substan-  I f these economies i n c r e a s e w i t h t h e s i z e o f  t r a n s p o r t companies, they o f f e r a s t r o n g j u s t i f i c a t i o n f o r merger.''"  In  C h a p t e r I I , i t was i n d i c a t e d t h a t economies o f s c a l e o f p l a n t s i z e and economies o f s c a l e o f management, a c c o u n t i n g , were s t r o n g r e a s o n s why merger a c t i v i t y  If  a d v e r t i s i n g and f i n a n c i n g  took p l a c e w i t h i n an i n d u s t r y .  t h e r e a r e economies o f s c a l e i n t h e t r u c k i n g i n d u s t r y , one would  e x p e c t t o see t h e a c q u i s i t i o n a c t i v i t y  t h a t has t a k e n p l a c e s i n c e 1950.  One would e x p e c t a t r e n d toward l a r g e r more e f f i c i e n t w h i c h would d r i v e o u t s m a l l e r o p e r a t o r s .  Virtually  t r u c k i n g companies  a l l s t u d i e s suggest  t h a t economies o f s c a l e do n o t e x i s t i n t h e t r u c k i n g i n d u s t r y . example, one s t u d y c o n c l u d e d t h a t f o r c a r r i e r s d o m i c i l e d  For  i n and o u t o f  New E n g l a n d and o p e r a t i n g  i n New E n g l a n d , t h a t s i z e o f f i r m b e a r s  r e l a t i o n s h i p to o p e r a t i n g  costs.  little  C o n s e q u e n t l y , i t can h a r d l y be main-  t a i n e d t h a t t h e r e a r e economies o f l a r g e s c a l e a v a i l a b l e i n the i n d u s t r y , 2 or a tendency toward monopoly r e s u l t i n g from t h a t c a u s e . In an E n g l i s h s t u d y , i t was found t h a t t h e r e were no economies o f  Kent T. H e a l e y , "The Merger Movement i n T r a n s p o r t a t i o n , " A m e r i c a n - E c o n o m i c -Review, May, 1962, p. 437. 2 Robert A. N e l s o n , "The Economies o f S c a l e i n t h e Motor C a r r i e r Industry: A R e p l y , " Land Economics, May 1959, p. 185.  - 63 scale i n t h e t r u c k i n g i n d u s t r y . *  T h i s s t u d y showed t h a t f o r a c e r t a i n  time, 1955-56, l a r g e f i r m s i n o f f - f a r m m i l k c o l l e c t i o n i n England had no advantage o v e r s m a l l ; i f a n y t h i n g t h e i r c o s t s were  higher.  A n o t h e r s t u d y a l s o demonstrated t h e absence o f economies o f s c a l e 2 in t h e t r u c k i n g i n d u s t r y .  This  s t u d y , however, demonstrated t h a t  were economies o f d e n s i t y t o be g a i n e d i n t h e t r u c k i n g i n d u s t r y . of d e n s i t y a r e d e f i n e d  Economies  as economies w h i c h a c c r u e from c a r r y i n g more t r a f f i c  o v e r a g i v e n complex o f p l a n t , equipment and r o u t e . a t t r i b u t e d t o two o p e r a t i n g  These economies were  c h a r a c t e r i s t i c s o f the t r u c k i n g  i n t e n s i t y o f r o u t e u t i l i z a t i o n and average h a u l . e n t a i l the addition of t r a f f i c  increments w i t h  can o n l y c o n t r i b u t e t o lower c o s t s  firm--the  A c q u i s i t i o n s which  t h e same g e n e r a l  p a t t e r n a r e n o t a p t t o bear much economic r e w a r d .  s p e c i f i c ways.  there  simply  haul  Acquisition activity  i f they a l t e r o p e r a t i n g  patterns i n  F o r example, end-to-end a c q u i s i t i o n s may r e s u l t i n i n c r e a s e d  average h a u l and p a r a l l e l c o m b i n a t i o n s may improve r o u t e u t i l i z a t i o n .  Much  more work needs t o be done i n t h i s a r e a o f s t u d y , e s p e c i a l l y f o r a p p r o v a l of r o u t e e x t e n s i o n s and a c q u i s i t i o n s by t h e r e g u l a t o r y  boards.  If one assumes t h a t t h e c o s t f u n c t i o n f o r t r u c k i n g f i r m s i s c o n s t a n t per u n i t o f o u t p u t as p l a n t s i z e i n c r e a s e s , t h e r e  i s l i t t l e reason to view  economies o f s c a l e as c o n d u c i v e to a c q u i s i t i o n a c t i v i t y industry.  i n the t r u c k i n g  There may v e r y w e l l be economies o f d i s e c o n o m i e s o f management,  M. C h i s h o l m , "Economies o f S c a l e i n Road Goods T r a n s p o r t , O f f Farm M i l k C o l l e c t i o n i n England and W a l e s , " Oxford Economic P a p e r s , O c t o b e r , 1959, pp. 283-290. 2 M e r i l l , J . R o b e r t s , "Some A s p e c t s o f Motor C a r r i e r C o s t s : Firm S i z e , E f f i c i e n c y and F i n a n c i a l H e a l t h , " Land Economics, May, 1956, pp. 228-38.  -  accounting, advertising  64 -  and f i n a n c i n g as w e l l as economies o f  density.  L i t e r a t u r e to date does not c l a r i f y where economies o f diseconomies and tends  to lump a l l c o s t s t o g e t h e r to show t h a t t h e r e are no economies  o f s c a l e at work i n the t r u c k i n g  In Chapter II, strongly firms firms,  industry.  the economies of s c a l e f a c t o r was viewed as  c o n d u c i v e to a c q u i s i t i o n  i n the t r u c k i n g  industry  activity.  tends  E v i d e n c e shows t h a t  should be a b l e to compete w i t h  assuming no o t h e r ' d i s a d v a n t a g e s  above d i s c u s s i o n is  exist  a c c r u e to s m a l l e r  not a v e r y s t r o n g reason f o r a c q u i s i t i o n s  small  larger  firms.  to i n d i c a t e that economies of s c a l e  being  The  in firm size  i n the t r u c k i n g  industry.  Economies of d e n s i t y ,  accounting,  f i n a n c i n g and so on may be v a l i d  reasons  f o r such a c q u i s i t i o n s  to take p l a c e but to date no e v i d e n c e has been  p r e s e n t e d to v a l i d a t e  this  claim.  Technological Factor  In Chapter II,  the d i s c u s s i o n  p o i n t e d out t h a t f o r a f i r m to remain  competitive,  i t must keep up w i t h t e c h n o l o g i c a l advances.  c a l advances  tend to make l a r g e  These  technologi-  c o r p o r a t i o n s v e r y a t t r a c t i v e to s u p p l y  i n c r e a s e d c a p i t a l base and the i n c r e a s e d m a n a g e r i a l base n e c e s s a r y advantage  of  t e c h n o l o g i c a l change.  In  change has had an i n f l u e n c e i n c a u s i n g  the t r u c k i n g  industry,  to  the take  technological  the a c q u i s i t i o n a c t i v i t y  that  has  taken p l a c e .  There has been a f a i r l y r a p i d t e c h n o l o g i c a l advance t a k i n g i n the t r u c k i n g  industry,  e s p e c i a l l y s i n c e 1945.  Much o f  advance has been i n equipment, f o r example the s h i f t d i e s e l engines.  The d i e s e l o f f e r s  this  place  technological  from g a s o l i n e  to  improved f u e l economy, lower maintenance  -  c o s t s and g r e a t e r d e p e n d a b i l i t y .  65  -  A l o n g w i t h b e t t e r e n g i n e s came b e t t e r  d r i v e - t r a i n components, l i g h t e r and s t r o n g e r o t h e r such changes.  t r a c t o r s and t r a i l e r s ,  The l a r g e r b e t t e r f i n a n c e d  and  f i r m s were t h e ones t h a t  were a b l e t o o b t a i n t h e s e new developments and g a i n t h e c o m p e t i t i v e advantage o v e r t h o s e f i r m s , u s u a l l y s m a l l e r ones, t h a t c o u l d not o b t a i n such equipment.  F u t u r e developments w i l l facilities.  likely  take p l a c e  Because o f t h e h i g h l a b o u r  i n improved  terminal  content i n the t r u c k i n g  industry,  f u t u r e t e c h n o l o g i c a l developments w i l l emphasize g r e a t e r p r o d u c t i v i t y per worker.  Automated t e r m i n a l s a r e on the h o r i z o n .  f o r c e d , e i t h e r by c o m p e t i t i o n  Truckers w i l l  w i t h i n the i n d u s t r y o r from o t h e r modes o f  t r a n s p o r t , t o improve s e r v i c e as r a p i d l y as p o s s i b l e . sure w i l l perpetuate long-term p r o d u c t i v i t y trends saving  a l s o be  Competitive  pres-  e s p e c i a l l y o f the labour  type.  The industry.  u s e o f e l e c t r o n i c d a t a equipment i s p r e s e n t l y e n t e r i n g t h e Most o f t h e e f f o r t s t o d a t e have been d i r e c t e d a t r e d u c i n g  c l e r i c a l costs.  The computer, however, appears t o a f f o r d a  advantage t o those who can u t i l i z e  i t s services.  competitive  F o r example, the computer  may w e l l a f f o r d answers t o complex problems w h i c h can a l l o w b e t t e r  utili-  z a t i o n o f equipment.  The  u s e o f h i g h l y mechanized t e r m i n a l s , e l e c t r o n i c d a t a  equipment, b e t t e r and more s p e c i a l i z e d t r u c k s and t r a i l e r s , will  and so on,  tend t o make t h e t r u c k i n g i n d u s t r y more c a p i t a l i n t e n s i v e .  w i l l demand f i r m s t o grow i n s i z e so t h a t they can u t i l i z e as t h e i r c o m p e t i t o r s .  Larger  firms w i l l  processing  This  t h e same t o o l s  tend t o form as they a r e more  -  66  -  a t t r a c t i v e t o keep up w i t h t e c h n o l o g i c a l change.  Diversification  Factor  Many f i r m s have grown and d i v e r s i f i e d o v e r t i m e .  Geographic  e x p a n s i o n i s a form o f d i v e r s i f i c a t i o n because i t g i v e s t h e f i r m a g r e a t e r number o f i n d u s t r i e s t o draw from, making i t l e s s a f f e c t e d by a depression  i n any one.  Many f i r m s a r e d i v e r s i f i e d  forms o f t r u c k i n g o p e r a t i o n s as w e l l .  i n t o many s p e c i a l i z e d  F o r example, d i v e r s i f i c a t i o n c a n be  i n t o moving and s t o r a g e , d e m o l i t i o n , a i r f r e i g h t f o r w a r d i n g , heavy h a u l i n g , and  so o n . Much o f t h e g e o g r a p h i c d i v e r s i f i c a t i o n has taken p l a c e i n r e s p o n s e  to  c h a n g i n g demands o f s h i p p e r s who want t h e i r goods d e l i v e r e d e x p e d i e n t l y  and w i t h c e r t a i n t y t o any p o i n t w i t h i n t h e i r a r e a o f d i s t r i b u t i o n . f i r m s cannot g i v e the same s e r v i c e as l a r g e r f i r m s . l a r g e r firms w i l l occur  I t can be argued t h a t  i n t h e t r u c k i n g i n d u s t r y , even i f no economies  o f s c a l e e x i s t , because o f t h e s e r v i c e advantages i n h e r e n t c a l l y extensive operations c a r r i e r to get t r a f f i c .  Small  i n geographi-  and hence a g r e a t e r a b i l i t y o f t h e l a r g e r  There appears t o be a p r e f e r e n c e  on t h e p a r t o f  s h i p p e r s t o send t h e i r goods by the t r u c k i n g f i r m w h i c h p r o v i d e s p l e t e s e r v i c e t o the u l t i m a t e d e s t i n a t i o n o f the shipment.  a com-  As l o n g as  t h i s s i n g l e l i n e . s e r v i c e i s p r e f e r r e d , t h e l a r g e r c a r r i e r s o p e r a t i n g over an e x t e n s i v e g e o g r a p h i c a r e a w i l l have an advantage over s m a l l e r f i r m s . Some o f t h e reasons f o r t h i s added a t t r a c t i v e n e s s t o s h i p p e r s a r e d i r e c t s e r v i c e t o more m a r k e t s , reduced t r a n s i t t i m e , reduced p o s s i b i l i t y o f damage and more f r e q u e n t  schedules.  67  -  The  d e s i r e to d i v e r s i f y g e o g r a p h i c a l l y  s e r v i c e and end  -  o b t a i n i n g more t r a f f i c  i n hopes o f o f f e r i n g b e t t e r  i s a strong f a c t o r causing  a c q u i s i t i o n s t h a t have t y p i f i e d the i n d u s t r y .  s t a b i l i z e e a r n i n g s has industry.  shows no  d e s i r e to d i v e r s i f y has  immediate s i g n s o f s u b s i d i n g .  The  increased  to  trucking  back h a u l t r a f f i c  a c q u i s i t i o n as w e l l as to e x t e n d s e r v i c e i n t o moving and The  end-to-  A strong desire  a l s o caused much d i v e r s i f i c a t i o n i n the  Many f i r m s t r y to b a l a n c e head and  related fields.  the  through  s t o r a g e and  s i n c e 1950  and  d i v e r s i f i c a t i o n philosophy  i s a v e r y i m p o r t a n t f a c t o r as many f i r m s i n t e r v i e w e d  were s t r i v i n g  d i v e r s i f y i n an attempt to c u s h i o n the impact o f any  severe d e c l i n e  traffic  from one  Industry  other  to in  g e o g r a p h i c a r e a or type o f s e r v i c e .  L i f e Cycle  As d i s c u s s e d  Factor i n Chapter I I , much merger a c t i v i t y can be  i n the e a r l y s t a g e o f an i n d u s t r y ' s  l i f e cycle.  expected  Many symptoms o f  t r u c k i n g i n d u s t r y tend to i n d i c a t e t h a t i t i s a p p r o a c h i n g the end  the of  the  e a r l y s t a g e o f development.  The  r a p i d growth r a t e b e f o r e 1957  the t r u c k i n g i n d u s t r y has r a t e o f growth has o f 7-8  i n d i c a t e d i n T a b l e I I , shows t h a t  been u n d e r g o i n g a r a p i d l y expanding demand.  shown s i g n s o f l e v e l i n g o f f i n the 1960's to a r a t e  p e r c e n t per y e a r as shown i n T a b l e V I I I .  would i n d i c a t e the a p p r o a c h i n g end  This  leveling off effect  to the early, s t a g e o f growth.  H i g h b u s i n e s s m o r t a l i t y i s a n o t h e r c h a r a c t e r i s t i c o f the s t a g e o f the  This  industry cycle.  The  t r u c k i n g i n d u s t r y has  of m o r t a l i t y throughout i t s h i s t o r y . d e p r e s s i o n o f the 1930's and  T h i s was  had  early  a high  rate  e s p e c i a l l y true during  subsequent minor r e c e s s i o n s .  I n the  the  early  -  68 -  TABLE V I I I PERCENTAGE GROWTH IN TON-MILES PERFORMED IN CANADA BY TRUCK ( M i l l i o n s of Ton-Miles)  Percentage Increase Per Year  Year  Source:  1950 - 1960  8.2%  1960 - 1961  16.3%  1961 - 1962  2.9%  1962 - 1963  .7%  1963 - 1964  8.8%  1964 - 1965  6.7%  Calculated  from T a b l e I I .  average  -  1 9 5 0 ' s , t h e r e were many l o n g - h a u l  69  -  f i r m s t h a t d i d not s u r v i v e the e a r l y  t r o u b l e s o f hoof-and-mouth d i s e a s e , new competition.  equipment procurement and  railway  A l t h o u g h m o r t a l i t y e x i s t s i n the i n d u s t r y , t h e r e i s  d e f i n i t e l y a t r e n d toward more f i n a n c i a l l y s t a b l e f i r m s .  This  slowing  down o f the m o r t a l i t y r a t e a l s o i n d i c a t e s t h a t the i n d u s t r y i s a p p r o a c h i n g the end  o f the e a r l y s t a g e o f development.  The  investment o f v e n t u r e c a p i t a l i n d i c a t e s t h a t the  industry i s  still  i n the e a r l y s t a g e o f development.  entry  i n t o the t r u c k i n g i n d u s t r y , many e n t r e p r e n e u r s e n t e r e d  i n the 1920's and  Because o f the low c o s t s  industry  1930's as w e l l as i n the e a r l y 1950's to e x p l o i t the  demand f o r t r u c k i n g w h i c h e x i s t e d at the t i m e . 1950's was  the  of  the i n c r e a s e d  A notable  trend  i n v e s t m e n t o f c a p i t a l from o u t s i d e  In s e v e r a l important instances  t h i s c a p i t a l was  i n the  the  industry.  used t o c o n s o l i d a t e  h a u l s e r v i c e s w i t h complementary short-to-medium h a u l o p e r a t i o n s .  longFor  example, C a n a d i a n Motorways L i m i t e d i s owned by B r i t i s h T r a c t i o n Corp o r a t i o n of Great B r i t a i n . from the U n i t e d  States.  C a p i t a l a l s o entered  the t r u c k i n g i n d u s t r y  Canadian Freightways L i m i t e d  i s owned by Con-  s o l i d a t e d F r e i g h t w a y s L i m i t e d , the l a r g e s t t r u c k i n g f i r m i n the States.  Another United  l i n e s Incorporated, operating R e g i n a and  The  States  trucking f i r m , United  United  Buckingham Truck-  owns M i l l a r and Brown L i m i t e d , a t r u c k i n g f i r m  from Vancouver t h r o u g h the Kootenays t o C a l g a r y ,  Edmonton,  Winnipeg.  p a r t i c i p a t i o n o f the r a i l w a y s i n t o t r u c k i n g i s a l s o  as i s the c u r r e n t e n t r a n c e o f c o n g l o m e r a t e c o r p o r a t i o n s i n the l a s t few y e a r s .  The  notable  i n t o the  i n v e s t m e n t o f the c o n g l o m e r a t e  industry  corporations,  70 -  -  i n p a r t i c u l a r , tends t o i n d i c a t e t h a t t h e i n d u s t r y i s s t i l l viewed as an i n v e s t m e n t w i t h a b e t t e r than average growth r a t e . The W e s t e r n C a n a d i a n T r u c k i n g o f h a v i n g a few f i r m s e v o l v e  Industry  i s s t a r t i n g t o show s i g n s  i n t o p o s i t i o n s o f dominance.  These f i r m s  are g a i n i n g a l a r g e r s h a r e o f t h e market by a c q u i r i n g s m a l l e r f i r m s and are a t t r a c t i n g b e t t e r f i n a n c i n g .  T h i s tends t o i n d i c a t e an i n d u s t r y made  up o f a few dominant t r u c k i n g companies d o i n g t h e l a r g e s t s h a r e o f t h e industry's t o t a l business. firms doing very  A t t h e same t i m e ,  localized service.  t h e r e w i l l be many s m a l l  As t h e i n d u s t r y approaches t h e end  o f t h e e a r l y s t a g e o f i t s l i f e c y c l e , one would e x p e c t t h e a c q u i s i t i o n a c t i v i t y t o s l o w down as t h e o p p o r t u n i t i e s f o r e x p a n s i o n by a c q u i s i t i o n become l e s s . The  above d i s c u s s i o n i n d i c a t e s t h a t t h e i n d u s t r y i s s t i l l  i n the  e a r l y s t a g e o f t h e i n d u s t r y ' s l i f e c y c l e and t h a t much o f t h e a c q u i s i t i o n a c t i v i t y i s a t t r i b u t a b l e to t h i s f a c t o r . end  As t h e i n d u s t r y approaches t h e  o f t h i s e a r l y s t a g e o f development, a l e s s o r number o f a c q u i s i t i o n s  would be e x p e c t e d . Management A b i l i t y It  i s generally recognized  t h a t most s m a l l t r u c k i n g f i r m s a r e  managed by s e l f - e s t a b l i s h e d former d r i v e r s who l a c k m a n a g e r i a l t a l e n t s appropriate  f o r larger firms.  As many o f t h e s e s m a l l f i r m s grow i n s i z e ,  the narrow e x p e r t i s e o f the managers i s n o t enough t o a l l o w t h e f i r m s t o be c o m p e t i t i v e . 'awkward a g e .  1  Lack o f m a n a g e r i a l a b i l i t y has brought many f i r m s t o an H i s t o r i c a l l y , many o f t h e s e f i r m s have had t o e i t h e r go  bankrupt or j o i n w i t h  larger carriers.  - 71 -  As many o f the t r u c k i n g f i r m s have grown i n s i z e , so have t h e i r need f o r s p e c i a l i z e d managers such as r a t e men, customs b r o k e r s , agents, dispatchers,  and so on.  Larger t r u c k i n g firms are best able to  o b t a i n such s p e c i a l i s t s and as such have made c o m p e t i t i o n operator tougher. abilities,  auditors,  f o r the s m a l l  R e c o g n i z i n g the need f o r many o f t h e s p e c i a l i z e d  s m a l l t r u c k i n g f i r m s a t the 'awkward a g e  1  tend t o be  acquired  by l a r g e r f i r m s .  I n t h e f u t u r e , the need f o r good m a n a g e r i a l a b i l i t i e s greater.  w i l l be even  The t r u c k i n g i n d u s t r y i s p r e s e n t l y g o i n g through a t r a n s i t o r y  stage i n t o a period of managerial s o p h i s t i c a t i o n . has been s l o w i n a t t r a c t i n g good m a n a g e r i a l  The t r u c k i n g  industry  ability.  A few t r u c k i n g f i r m s a r e now b r i n g i n g i n h i g h l y s k i l l e d  managers.  For example, the r a i l w a y s a r e moving p e r s o n n e l f r o m t h e r a i l w a y s their trucking operations.  I f the computer b r i n g s h i g h  a d v a n t a g e s , then management a b i l i t i e s reason f o r a c q u i s i t i o n s to occur. firms to acquire  Financial  into  competitive  w i l l c o n t i n u e t o be an i m p o r t a n t  This  f a c t o r w i l l tend t o cause l a r g e r  l e s s a b l y managed f i r m s i n t h e f u t u r e .  Factor  I n almost a l l the i n t e r v i e w s  conducted by the a u t h o r , i t was  t h a t most a c q u i s i t i o n s t h a t have t a k e n p l a c e were o f l a r g e r f i r m s s m a l l e r , f i n a n c i a l l y weak f i r m s .  position.*  This  acted  I n one p a r t i c u l a r  had j u s t under a 2 m i l l i o n d o l l a r l o s s  as an i n c e n t i v e f o r p u r c h a s e and a l s o  ^ C o n f i d e n t i a l , personal  acquiring  In f a c t , a l a r g e amount o f t h e a c q u i s i -  t i o n s were o f f i r m s on the v e r g e o f b a n k r u p t c y . a c q u i s i t i o n , the f i r m a c q u i r e d  found  i n t e r v i e w , 1969.  typified  -  l  i  -  the, problems t h a t many t r u c k i n g f i r m s have found themselves i n .  Many s m a l l t r u c k i n g f i r m s have r u n i n t o a squeeze where they have n o t made t h e p r o p e r p r o v i s i o n s f o r equipment r e p l a c e m e n t and e x p a n s i o n . These f i r m s a r e n o t f a r from s e r i o u s f i n a n c i a l d i f f i c u l t y . f i r m s appear f o r s a l e o r go b a n k r u p t . for  l a r g e pools o f c a p i t a l to supply  Many such  Most f i r m s today r e a l i z e t h e need  t h e needed funds f o r e x p a n s i o n and  equipment r e p l a c e m e n t .  The  s m a l l f i r m s have been l i m i t e d as t o t h e amount o f debt t h a t  they could o b t a i n .  Investors  good management and o t h e r  t y p i c a l l y r e q u i r e a proven e a r n i n g s  such c r i t e r i a b e f o r e  record,  l o a n s w i l l be g r a n t e d .  Most s m a l l t r u c k i n g f i r m s a r e u n a b l e t o meet t h e r e q u i r e m e n t s t o o b t a i n the n e c e s s a r y debt t o r e m a i n o p e r a t i v e .  Many o f t h e t r u c k i n g f i r m s w h i c h a r e e x p r e s s i n g  dominance a r e ones  t h a t have been s u c c e s s f u l i n t y i n g i n t o l a r g e p o o l s o f c a p i t a l .  For  example, J o h n s t o n T e r m i n a l s L i m i t e d and G i l l I n t e r p r o v i n c i a l T r u c k l i n e s L i m i t e d have gone p u b l i c i n t h e l a s t 5-10 y e a r s . P u b l i c Freightways Limited being  acquired  A n o t h e r example i s  by C o r o n a t i o n C r e d i t  Corporation.  I n any c a s e , t h e need f o r a v a i l a b l e c a p i t a l t o meet f u t u r e e x p a n s i o n and r e p l a c e m e n t o f equipment i s a v e r y s i g n i f i c a n t f a c t o r i n c a u s i n g many o f the a c q u i s i t i o n s t h a t have t a k e n p l a c e .  I t i s very  likely  t h a t l a r g e r f i r m s appear a t t r a c t i v e because t h e y  .can o b t a i n t h e funds needed f o r e x p a n s i o n more e a s i l y .  The t r u c k i n g  i n d u s t r y has been plagued w i t h u n d e r c a p i t a l i z a t i o n over the y e a r s and w i t h funds a v a i l a b l e , a g g r e s s i v e  management w i l l be a b l e t o seek t h e r o u t e  - 73 a u t h o r i t i e s needed t o e x t e n d t h e i r  Sympathetic  The includes  operations.  Factor  commodity s o l d i s b a s i c a l l y the q u a l i t y o f s e r v i c e .  such f a c t o r s as speed, r e l i a b i l i t y ,  freedom from l o s s and damage,  p i c k up and d e l i v e r y s e r v i c e , and i d e n t i c a l r o u t e p a t t e r n s . for  c e r t a i n route patterns  one  of the s i g n i f i c a n t f a c t o r s causing  activity  i n the t r u c k i n g  deemed n e c e s s a r y f o r c o m p e t i t i v e  The d e s i r e reasons i s  a snowball e f f e c t to the a c q u i s i t i o n  industry.  One end-to-end a c q u i s i t i o n seems to cause o t h e r s . seeing  This  One c a r r i e r ,  i t s c o m p e t i t o r expand s e r v i c e , h a s t e n s t o do l i k e w i s e .  i m p l i c a t i o n s o f not having a competitive  The  route a u t h o r i t y i s that only  those  p o i n t s o f a f i r m ' s r o u t e a u t h o r i t y can be s e r v i c e d and o t h e r p o i n t s go t o competitors.  I t i s apparent t h a t , s t a r t i n g i n t h e 1950's, t h a t a  s y m p a t h e t i c r e a c t i o n has o c c u r r e d w i t h i n t h e t r u c k i n g i n d u s t r y i n o r d e r to o b t a i n c o m p e t i t i v e  route a u t h o r i t i e s .  This  s y m p a t h e t i c r e a c t i o n might  l e a d t o a c q u i s i t i o n s w h i c h a r e done i n h a s t e and w h i c h might end up u n p r o f i t a b l e and complete f a i l u r e s .  CHAPTER V  CONCLUSIONS  The p r e c e e d i n g t h r e e c h a p t e r s have attempted  t o document t h e n a t u r e  o f a c q u i s i t i o n a c t i v i t y w i t h i n t h e Western Canadian T r u c k i n g I n d u s t r y and t o i s o l a t e and d i s c u s s t h e r e l a t i v e importance o f f a c t o r s c o n d u c i v e t o this acquisition activity. t h e more i m p o r t a n t  The purpose o f t h i s c h a p t e r i s t o summarize  findings.  F i r s t , many o t h e r areas o f s t u d y suggest themselves this thesis.  throughout  An i m p o r t a n t a r e a where f u r t h e r i n v e s t i g a t i o n i s n e c e s s a r y  concerns a s t u d y w h i c h d e t e r m i n e s the e f f i c i e n c y o f t r u c k i n g f i r m s .  the o p e r a t i n g f e a t u r e s which  Such a s t u d y would e n a b l e economic  d e c i s i o n s t o be made on a c q u i s i t i o n s and mergers by t r u c k i n g management and by t h e r e g u l a t o r s .  affect  firms'  A s t u d y o f economies o f s c a l e would  a l s o be d e s i r o u s i n t h e Western Canadian T r u c k i n g I n d u s t r y .  Such a s t u d y  s h o u l d t r y t o i n v e s t i g a t e where, i f a t a l l , economies o f d i s e c o n o m i e s exist.  F o r example, a r e t h e r e economies o r d i s e c o n o m i e s  of firm  size,  management, a c c o u n t i n g , a d v e r t i s i n g and f i n a n c i n g ?  Another area which r e q u i r e s i n v e s t i g a t i o n i s the area of s h i p p e r s ' preferences.  Such a s t u d y s h o u l d d e t e r m i n e  quality of service with larger carriers.  i f shippers associate superior  The i m p l i c a t i o n h e r e i s t h a t i f  s h i p p e r s p r e f e r l a r g e r c a r r i e r s t o s m a l l , the i n d u s t r y may take t h e form o f few l a r g e r c a r r i e r s w i t h b e t t e r q u a l i t y o f s e r v i c e r a t h e r than an  -  i n d u s t r y composed o f many s m a l l e r  75  -  t r u c k i n g f i r m s and p o o r e r q u a l i t y o f  service. A s t u d y t o d e t e r m i n e whether t h e r e g u l a t o r y o b j e c t i v e s o f f i n a n c i a l r e s p o n s i b i l i t y and s t a b i l i t y a r e b e i n g l a r g e r f i r m s would a l s o be d e s i r o u s .  a c h i e v e d through t h e f o r m a t i o n o f I f no economies o f s c a l e e x i s t , t h e n  s m a l l c a r r i e r s c o u l d compete as e f f i c i e n t l y as l a r g e . i s that the formation  The i m p l i c a t i o n h e r e  o f l a r g e r s i z e t r u c k i n g f i r m s may n o t be s o l v i n g  the f i n a n c i a l l y weak c a r r i e r problem w h i c h has c h a r a c t e r i z e d t h e t r u c k i n g i n d u s t r y f o r so many y e a r s .  F o r example, t h i s c o u l d d e v e l o p i f d i s e c o n o -  mies o f s c a l e e x i s t i n t h e i n d u s t r y . may f i n d i t d e s i r o u s  I f t h i s were t r u e , t h e r e g u l a t o r s  to review t h e i r a c q u i s i t i o n approval  criteria.  Another important area o f study i s that o f intermodal Such a s t u d y s h o u l d  ownership.  t r y t o d e t e r m i n e what n e t b e n e f i t s a r e l i k e l y t o  a c c r u e from i n t e r m o d a l  ownership.  A good f o c u s f o r such a s t u d y would be  to a n a l y s e t h e two r a i l w a y s p a r t i c i p a t i n g i n t h e t r u c k i n g i n d u s t r y . C a n a d i a n P a c i f i c T r a n s p o r t L i m i t e d , between 1958 and 1962, c o n s o l i d a t e d a l l t h e i r acquired grated  t r u c k i n g f i r m s i n t o one o p e r a t i o n a l u n i t .  This  approach d i f f e r s from t h e approach o f Canadian N a t i o n a l  L i m i t e d who o p e r a t e t h e i r t r u c k i n g f i r m s as s e p a r a t e u n i t s . competes w i t h o t h e r s  inte-  Transport  Each u n i t  and o p e r a t e s under independent c o l o u r s w i t h each  r e p o r t i n g s e p a r a t e p r o f i t and l o s s s t a t e m e n t s . approaches t o i n t e r m o d a l  ownership would p r o v i d e  These two d i f f e r i n g a good base f o r such a  study.  A n o t h e r a r e a o f study o f growing i n t e r e s t i s t h e one o f f o r e i g n ownership i n t h e Western Canadian T r u c k i n g  Industry.  For example, how  -  desirous  76  -  i s i t t o have l a r g e A m e r i c a n owned t r u c k i n g f i r m s i n f l u e n c i n g  p o l i c y i n the C a n a d i a n t r a n s p o r t a t i o n f i e l d ?  Another r e l a t e d area of  i m p o r t a n c e i s a study o f the d e s i r a b i l i t y of o u t s i d e o w n e r s h i p . example, how  a b l e are managers o f c o n g l o m e r a t e c o r p o r a t i o n s  t r a n s p o r t a t i o n companies, and  For  i n managing  are t h e i r i n t e r e s t s the same as those o f •  companies concerned o n l y w i t h the t r a n s p o r t a t i o n  function?  T h i s s t u d y shows t h a t t h e r e has been much a c q u i s i t i o n a c t i v i t y the W e s t e r n Canadian T r u c k i n g  Industry  s i n c e 1950.  in  This a c q u i s i t i o n  a c t i v i t y has  tended to extend r o u t e a u t h o r i t y and  commodity scope o f  operations.  Most o f t h e s e a c q u i s i t i o n s have been o f a  market-oriented  t y p e g e n e r a l l y t y p i f i e d by end-to-end a c q u i s i t i o n s , t h a t a r e aimed at improving s e r v i c e .  Most o f the a c q u i s i t i o n a c t i v i t y t h a t has  t a k e n p l a c e has  been o f  l a r g e r f i r m s a c q u i r i n g s m a l l e r t r u c k i n g f i r m s , u s u a l l y ones t h a t a r e i n financial difficulty. o f the a c q u i r e d  I n the m a j o r i t y o f c a s e s , the most v a l u a b l e  f i r m has  the o n l y e x p e d i e n t way  been the r o u t e a u t h o r i t y .  In p r a c t i c a l  must prove p u b l i c c o n v e n i e n c e and  route  a r e l i k e l y to be c o n d u c i v e to a c q u i s i t i o n a c t i v i t y i n any found  authority  necessity.  found i n Chapter I I , t h a t many f a c t o r s can be  C h a p t e r IV i t was  terms,  f o r a c a r r i e r to expand i s to p u r c h a s e a d d i t i o n a l  e x i s t i n g r o u t e a u t h o r i t i e s , s i n c e an a p p l i c a n t f o r a new  I t was  asset  i s o l a t e d that  industry.  t h a t t h e s e f a c t o r s v a r i e d i n i m p o r t a n c e when  c o n s i d e r i n g the W e s t e r n Canadian T r u c k i n g  Industry.  More s p e c i f i c a l l y , the e n v i r o n m e n t a l f a c t o r s were found t o  be  In  -77  c o n d u c i v e to merger a c t i v i t y .  -  I t was  found t h a t a c q u i s i t i o n  o c c u r r e d d u r i n g economic e x p a n s i o n p e r i o d s . trucking  firms  available  tend to get  acquisitions  During recessions,  i n t o f i n a n c i a l d i f f i c u l t y and  f o r s a l e or go b a n k r u p t .  during periods of increasing  is  the r e c e n t p e r i o d  become  business expectations, A little  speculation  found to be one  c o n d u c i v e to a c q u i s i t i o n a c t i v i t y . o f r e s t r i c t i o n o f e n t r y and  o f the  strongest  I t can b e - c o n c l u d e d t h a t , b a r r i n g  the a c q u i s i t i o n a c t i v i t y t h a t has  The  railway  taken p l a c e s i n c e  a f t e r World War  s t r i k e o f 1950  Highway a c t e d as a f u r t h e r Many o f the  industry  government  continue.  I I had  and  1950.  The  exploitable  a v e r y prominent r o l e  i n a f a i r l y rapid  the b u i l d i n g o f the  s t i m u l u s to t h i s a c q u i s i t i o n factors  acquisition  Trans-Canada  activity.  took p l a c e .  Economies of  s c a l e were viewed as b e i n g s t r o n g r e a s o n s f o r merger a c t i v i t y i n E v i d e n c e showed t h a t  in  i s o l a t e d i n Chapter I I a l s o were  c o n d u c i v e to the a c q u i s i t i o n a c t i v i t y t h a t  generally.  by  a very powerful e f f e c t i n causing  the r a p i d a d j u s t m e n t s n e c e s s a r y t h a t r e s u l t e d movement.  authority  been c r e a t e d  some new  the r e c e n t h i g h a c q u i s i t i o n a c t i v i t y w i l l  that p r e v a i l e d  practices  r e l a t i v e l y easy a p p r o v a l o f r o u t e  Economic d i s t u r b a n c e s have had  conditions  there  forces  Because o f the r e g u l a t o r y  t r a n s f e r s , a c l i m a t e c o n d u c i v e to a c q u i s i t i o n a c t i v i t y has  regulation,  would  economy.  l e g a l f a c t o r was  the r e g u l a t o r s .  especially  of high a c q u i s i t i o n a c t i v i t y continuing u n t i l  a s h a r p r e v e r s a l of the  The  many  Many of these f i r m s become a t t r a c t i v e  i f they p o s s e s s a t t r a c t i v e r o u t e a u t h o r i t i e s . see  activity  t h i s f a c t o r has  c a u s i n g the a c q u i s i t i o n a c t i v i t y t h a t has  very l i t t l e  t a k e n p l a c e i n the  industry  effect  in  trucking  -  industry.  78  -  A t t h e same t i m e , t h e r e may e x i s t economies o f d e n s i t y ,  management, a c c o u n t i n g , a d v e r t i s i n g and f i n a n c e t h a t tend t o be c o n d u c i v e to a c q u i s i t i o n a c t i v i t y .  The t e c h n o l o g i c a l f a c t o r has p l a y e d a s i g n i f i c a n t r o l e i n t h e acquisition activity  t h a t has t a k e n p l a c e .  Larger firms are desirous to  a t t r a c t t h e f i n a n c i a l and m a n a g e r i a l base n e c e s s a r y t o t a k e advantage o f t h e many t e c h n o l o g i c a l changes t h a t have t a k e n p l a c e .  Future  g i c a l changes w i l l tend t o make t h e Western Canadian T r u c k i n g more c a p i t a l i n t e n s i v e . appears t o be d i r e c t e d  technolo-  Industry  Most o f t h i s t e c h n o l o g i c a l change i n t h e f u t u r e at i n c r e a s i n g p r o d u c t i v i t y per worker.  A  little  s p e c u l a t i o n would see t h i s t e c h n o l o g i c a l f a c t o r becoming more s t r o n g l y c o n d u c i v e t o a c q u i s i t i o n a c t i v i t y as automated t e r m i n a l s d a t a equipment become more w i d e l y  used.  The d e s i r e t o d i v e r s i f y g e o g r a p h i c a l l y s e r v i c e and o b t a i n i n g more t r a f f i c acquisitions.  and e l e c t r o n i c  i s a strong  i n hopes o f o f f e r i n g b e t t e r f a c t o r causing  The d e s i r e , t o s t a b i l i z e e a r n i n g s ,  b a l a n c e head and back  h a u l , and t o extend s e r v i c e i n t o r e l a t e d moving and s t o r a g e , and  end-to-end  a i r freight,  so o n , make t h e d i v e r s i f i c a t i o n f a c t o r a s t r o n g one i n c a u s i n g  acquisition activity.  This  f a c t o r shows no s i g n s o f s u b s i d i n g  tend t o p e r p e t u a t e mergers i n t h e Western Canadian T r u c k i n g  this  and s h o u l d  Industry.  Another f a c t o r which i s a s s o c i a t e d w i t h the a c q u i s i t i o n a c t i v i t y t h a t has o c c u r r e d ,  i s the i n d u s t r y l i f e c y c l e f a c t o r .  show t h a t t h e W e s t e r n Canadian T r u c k i n g s t a g e o f development. maturity  stage.  Industry  E v i d e n c e tends t o  i s presently  Few symptoms show t h a t t h e i n d u s t r y  i n the e a r l y  i s nearing the  I f t h e i n d u s t r y f o l l o w s t h e expected p a t t e r n t h e  - 79 a c q u i s i t i o n a c t i v i t y c o u l d be e x p e c t e d t o s l o w down as the i n d u s t r y enters the maturity stage. few dominant f i r m s  The  A l i t t l e s p e c u l a t i o n would see r e l a t i v e l y  emerging.  t r u c k i n g i n d u s t r y i s p r e s e n t l y going through a t r a n s i t o r y  i n t o a p e r i o d o f management s o p h i s t i c a t i o n . f i r m s have had t o s e l l o u t o r go b a n k r u p t .  stage  H i s t o r i c a l l y , p o o r l y managed I n t h e f u t u r e , as a r e s u l t o f  the growing need f o r a t t r a c t i n g good m a n a g e r i a l a b i l i t y , t h i s management f a c t o r w i l l cause t h e s m a l l e r f i r m s t o be a t a d i s a d v a n t a g e and w i l l to  perpetuate the a c q u i s i t i o n a c t i v i t y  i n t h e Western Canadian  tend  Trucking  Industry.  The  f i n a n c i a l f a c t o r has a l s o had a s t r o n g a s s o c i a t i o n i n c a u s i n g  t h e a c q u i s i t i o n a c t i v i t y t h a t has t a k e n p l a c e .  The s e r i o u s f i n a n c i a l  d i f f i c u l t i e s e x p e r i e n c e d by many s m a l l e r t r u c k i n g f i r m s and t h e r e c o g n i t i o n f o r t h e need o f l a r g e p o o l s o f c a p i t a l t o s u p p l y e x p a n s i o n and equipment needs have been v e r y c o n d u c i v e t o t h e a c q u i s i t i o n a c t i v i t y t h a t has t a k e n p l a c e .  O u t s i d e c a p i t a l has been v e r y i n f l u e n t i a l i n c a u s i n g  this acquisition activity. of  The r a i l w a y s i n p a r t i c u l a r , due t o an absence  r e g u l a t i o n r e s t r i c t i n g i n t e r m o d a l ownership  the t r u c k i n g i n d u s t r y f r e e l y .  i n Canada, have e n t e r e d  This f i n a n c i a l f a c t o r should continue  to be an i m p o r t a n t f a c t o r i n p e r p e t u a t i n g a c q u i s i t i o n a c t i v i t y i n t h e Western Canadian T r u c k i n g I n d u s t r y .  The s y m p a t h e t i c f a c t o r has a l s o been i n f l u e n t i a l .  I t appears as i f  many a c q u i s i t i o n s have been made i n r e s p o n s e t o those by competing firms. of  trucking  T h i s s y m p a t h e t i c r e a c t i o n has e x p r e s s e d i t s e l f m a i n l y i n t h e form  end-to-end  a c q u i s i t i o n s that give a f i r m a s i m i l a r route a u t h o r i t y to  -  other firms. competitive  80  -  The d e s i r e f o r c e r t a i n r o u t e p a t t e r n s  deemed n e c e s s a r y f o r  r e a s o n s i s one o f the s i g n i f i c a n t f a c t o r s c a u s i n g  a snowball  e f f e c t i n the r a t e o f a c q u i s i t i o n a c t i v i t y .  In c o n c l u s i o n , taken place  t h i s s t u d y f i n d s t h a t much a c q u i s i t i o n a c t i v i t y has  i n t h e Western Canadian T r u c k i n g  Industry  s i n c e 1950 as  documented i n T a b l e V I . Most o f t h i s a c q u i s i t i o n a c t i v i t y has been t o extend route a u t h o r i t i e s .  T h i s ' a c q u i s i t i o n a c t i v i t y has been i n r e s p o n s e  to the f o l l o w i n g environmental f a c t o r s : f a c t o r , and economic d i s t u r b a n c e  factor.  business cycle f a c t o r , l e g a l Also  i n f l u e n t i a l i n causing  t h i s a c t i v i t y has been t h e f o l l o w i n g i n d u s t r i a l f a c t o r s :  diversification  f a c t o r , t e c h n o l o g i c a l f a c t o r , i n d u s t r y l i f e c y c l e f a c t o r , management f a c t o r , f i n a n c i a l f a c t o r and s y m p a t h e t i c f a c t o r .  Economies o f s c a l e  f a c t o r was found t o be r e l a t i v e l y u n i m p o r t a n t e x c e p t f o r p o s s i b l e management, a c c o u n t i n g , a d v e r t i s i n g and f i n a n c i a l economies.  There may a l s o  be some economies o f d e n s i t y .  I t i s hoped t h a t t h i s s t u d y w i l l  contribute  some u n d e r s t a n d i n g o f  t h e b a s i c a t t r i b u t e s o f t h e t r u c k i n g i n d u s t r y i n Western Canada t o optimum d e c i s i o n making by management and the r e g u l a t o r s .  leading  The r e s u l t ,  h o p e f u l l y , w i l l be t h e b e s t p o s s i b l e n a t i o n a l t r a n s p o r t a t i o n system.  BIBLIOGRAPHY  Books Adams, W a l t e r , and Hendry, James B. T r u c k i n g M e r g e r s , C o n s o l i d a t i o n s and S m a l l B u s i n e s s : An A n a l y s i s o f I n t e r s t a t e Commerce. Commission P o l i c y , Washington, D.C.: U. S. Government P r i n t i n g O f f i c e , 1957, pp. 190. A l b e r t s , W i l l i a m W., and S e g a l l , J o e l E. of Chicago P r e s s , 1966, p. 237.  The C o r p o r a t e Merger.  University  A m e r i c a n Management A s s o c i a t i o n . 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