A Conversation with John Thomson,

Vice President Canadian Operations, Huron Services Group, a CPC Logistics Company

:

LQ: Consolidation is a major trend in the industry, and your company was recently acquired. What are the major considerations or concerns when contemplating such a change?
John Thomson You must have what is best for your customers in mind as much as you do for yourself as owner of the company. If your customers cannot find synergies, value added services and overall better service with the new ownership they can choose not to migrate when the deal closes. This can seriously affect your purchase price and also the reputation of your company going forward.

Start with your basic business philosophy. The two must be very close or you shouldn't proceed.

You must consider whether it is a share purchase, where the shares themselves, trademarks, assets, goodwill and customers are purchased, or whether the purchase proposed is an asset purchase where the goodwill and customers only are purchased. Generally a share purchase occurs when you have an established brand or when you are practicing in an area of particular note or with a unique expertise. In the case of an asset sale usually the acquiring company proposes to roll-in your customers with their own. It all hinges on the business plan that is in play with the acquiring company. In our case CPC Logistics was looking for an established brand here in Canada in order to expand north of the border. Once we determined we were a good match from a philosophical standpoint it was easy to proceed.

LQ: Do you think the consolidation that is occurring in the industry is a positive or a negative trend?
John Thomson: On balance it is a positive trend. But that is true only if a few details are observed. First, any consolidation must benefit the customer base as a whole. Opportunities to apply leveraged purchasing principles must still exist for a prospective customer or you then begin to trend towards a monopoly type of situation, which is bad for everyone.

Second, you cannot ever look past the small and medium- sized customers. In many cases, such as our own, the business was built by way of initially smaller customers in terms of sales volume, then organic growth as you established standards of service and expanded your service offerings and core competencies. As they grew, so too did your business with them. You still have to be able to contribute to their success and not be viewed as a cost centre. Oftentimes the larger companies tend to treat their customers almost with a class distinction. Your smallest customer has to get the same service as your largest. CPC had the very same type of growth in the U.S., which brings us back to what I mentioned earlier about business philosophy.
You have to be able to pick the right partner when considering consolidation or it does not work in principle or in practice.

LQ: What are the major considerations when contemplating the use of a 3PL and how do you address these needs with your service offerings?

John Thomson I think a prospective customer looks at three major factors. Cost is the first and most obvious. I am certain the concept of 3PL would not make its way to the boardroom if there was no potential cost benefit. Second is whether the 3PL can assure your customers of the same or ideally better service than you currently provide. Third is whether your 3PL can accept the fact that they are, in effect, you. In other words they should be prepared to put your identity and reputation first and uphold the quality and identifiablity of your brand and put themselves in the background to some degree.

In our type of business we have found that by and large we deal with companies that identify their own core competencies. Usually they are manufacturing, and marketing and selling. they will in many cases outsource many of the other functions. They find that companies such as ourselves can provide a deeper network of expertise at less cost while making sure that the services are transparent to the public and to their customers. We are in the transportation business, our customers are in the manufacturing business. It is a natural fit for both parties.

LQ: Just having been acquired, has there been any change in your operations since the deal? What type of feedback have your customers provided?

John Thomson We can now offer a much larger infrastructure, expanded services and better overall service with added opportunities for networking. Existing Huron customers can include us when tendering other services that we were not offering previous to becoming part of CPC Logistics. This provides our customer with added opportunity for leveraged purchasing in adding a prospective new partner to the mix, and hopefully can provide us with an opportunity to add business based on volume pricing if we have existing business with them. It’s a win-win. So needless to say our customers are happy with our new incarnation.

Another benefit for our employees will be the new opportunities that will exist to move up in the organization. With many more avenues available there is improved morale. Better service to your customers comes when you have continuity in your workforce. Low turnover equals better results.
I would view our acquisition as being representative of one where both

parties did their due diligence. The result was a stronger company, more satisfied existing customers, and more opportunity to add to the customer base.

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