Gambling With the Haulage Industry
Page 45
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Some Further Reasons Why Hauliers Should Delay in Disposing of Their Businesses
By S.T.R.
THE title of this article may neea some clarification. Gambling, in the business sense, is the application of money to any industry in a speculative manner with an eye to gain in the immediate or near future, without regard to the effect of that process on the permanent prosperity of the industry.
That procedure is part of the common everyday practice of the Stock Exchange. It really means buying in anticipation of an early rise in value, and, when that rise occurs, selling. If, by any process of manipulation, the rise can be accelerated or accentuated, so much the better for the speculator. If the procedure, in all or in part, does temporary or even permanent harm to the particular industry that is "just too bad "—for the industry.
It is, unfortunately, only too frequently the case that any sudden accession of interest by high finance in any industry spells trouble for it. The cycle and motor trades have had some bitter lessons on that subject.
Possibilities of Prosperity.
It is, I think, pertinent to ask (following the advice I gave in the previous article [issue dated March II], that hauliers should await a favourable opportunity before selling) why it is that financial interests have so suddenly and so unexpectedly turned their attention to our industry? There can be but one reason—a particularly hopeful one in a way for the industry—namely, that they can see possibilities of a reasonably early
access of prosperity. That being the case, hauliers will, surely, be well advised to take their full and welldeserved share in that prosperity by holding on to their businesses rather than handing over a considerable part to outsiders.
In the course of discussions I have had the matter put before me in this manner: If a man is ill it is customary to call in a doctor. If an industry is ill it is appropriate to call in a financier. The fallacy in that argument seems to me to lie here: the doctor effects a cure, or attempts to do so, takes his reasonable fee and departs. The financier, on the other hand, usually takes as his reward a large share of the industry and either retains it or, as is more likely, disposes of it to some third, and probably innocent, party, leaving the patient—the industry—crippled if not still ailing. It is being said that the industry needs capital. I have been unable to find evidence of that need, except in one way, to which I will refer later. It is also being said that it needs organization. That, it must be
admitted, is true. as regards the majority of the individuals concerned.
In the majority of those examples of offers of finance with which I have come into contact there is no evidence either of the will to organize or of the capacity to do so.
On the contrary, one concern of which I have personal knowledge, possessing to a high degree the capacity to organize and the will to expand, was refused the financial interest which it needed for development, because the principal of the concern insisted that he should remain in control and develop the business on lines which had been shown to be sound.
A significant feature of so many of the offers which are rife to-day is the wide disparity between the valuation of the concern to be purchased when that valuation comprises shares and cash, and what is deemed to be a fair assessment if cash only is to be considered.
In one case, where the original offer was in the proportions of 70 per cent. shares and 30 per cent. cash— the total was suspiciously high—the proprietor of the business, being a man getting on in years, said that he would consider only a cash offer. That offer was limited to the 30 per cent. which he would, in any case, have received as cash!
On the face of it, this seems to indicate that the financial concern which was negotiating for the business did not expect that the shares would rank very high.
Lack of Security.
The fault of these several financial schemes is that they offer no security to those who are within the industry, who have made a success of it and who deserve to benefit when the industry is placed on a sound footing. They will be deprived of all vestige of ownership. They will liecome shareholders only, with more or less temporary and equally more or less secure positions as employees under service agreements.
The control of -Chose businesses, the success of which has been acquired as the result of personal effort and good service, will pass out of their hands. They will have no voice in the disposal or direction' or use of their vehicles, or as to themethod of dealing with those customers whom they have garnered.
Control will pass from those who are acquainted with the intricacies of the haulage industry to others who lack that knowledge,. Values will fall and the status of the industry, for a long time to come, will be considerably below what it is to-day. As a result, the shares which the vendors have acceptjd as part of the purchase price and which, in any case, cannot offer a return commensurate with the revenues which would be earned if they remained in control of their businesses, will slump. Moreover, in the present state of the money market that part of the purchase price which they receive in cash cannot be turned to good account and will, for some time to come, remain inert
In a subsequent article I shall suggest alternative and better methods of promoting the development of the industry and providing for that amalgamation and co-ordination which are undoubtedly inevitable.