DO understand risks, however, below is what I think from info I gathered as I'm certainly not an acquisition or merger expert. In my opinion, per below facts, Big Red is already a company making money and obviously a business that BTGI already knows and understands.
As you can see in bold, IMO, the trucking industry is probably one of the businesses that is GOOD to just focus in per very stable and will always be around. Acquisitions can help obtain better financing for this "toxic debt" you speak of. With $12 million more revenue into the books, I would think a lender would find that very attractive for possibly offering better terms on debt.
The risks in bold actually show mostly as strengths as it's already in a business this company knows very well. Other than the actual return on investment, I have no clue what it cost BTGI for this acquisition, but terms will be released very soon.
Reasons and Benefits
The main reason is diversification as to reduce risk. Exposure to risk increases when a company invests heavily in one industry or sector. Companies facing the prospect of bankruptcy often look for a business to acquire them. Corporations and large companies have liquid assets, access to sources of financing, and good cash flow management practices. Acquisition may also improve the chances of companies to gain access equity and debt financing. Tax benefits are another advantage for companies with net losses. Tax loss carry forward applies when losses are reported on the tax return and are used to reduce liabilities.
Risks Associated with Acquisition
The integration of new product lines, technologies, and marketing strategies may require different managerial practices, monitoring, and financial strategies. The target company has competitors, store customers, and business partners that are different from the acquirer’s customer base and competitors. Risks are also associated with unanticipated costs, delays, and other issues that arise with the integration of systems, staff, operations, and business practices. Other risks involve the sales volume, rates of return, and profits on the investment made. Some target companies require significant investment in new machinery and equipment. Business loans, money owed to suppliers, and other liabilities are another factor. Finally, risks and uncertainties also relate to the ability of the acquirer to develop new marketing strategies, launch new product lines, implement good practices, and maintain product licenses.
GO BTGI!!!!
AI
