The Impact of the Montgomery Decision on Freight Broker Mergers and Acquisitions
Last week I talked about the impact that Montgomery would likely have on carrier sales compensation and overall cost of compensation for freight brokers. There may be other impacts that I’m not considering, or which are not apparent now, but the final compensation impact I will discuss will be how companies are positioning themselves for M&A. Smaller organizations may see this as the ideal time to make their exit from the industry or to merge with companies with better insurance rates and more sophisticated carrier vetting tools. Some compensation systems play better than others in the M&A world. When a company is looking to buy a freight broker, they need some assurance that the assets they are buying (which are largely the people and their shipper and carrier relationships) are going to stay with the organization and help it thrive.
The easiest brokers to acquire are the ones with the most discipline in how they define and pay for work. When a company has clear job descriptions and a market-based salary structure, an acquirer can map every role onto its own org chart, benchmark the pay against its own bands, and model the combined cost structure with confidence. There are no surprises. Contrast that with a broker that has no such discipline, where two people doing the same job earn wildly different amounts based on tenure, negotiating skill, or simply who they know. An acquirer looking at that organization sees a minefield, because every move toward consistency creates a winner and a loser, and the losers are often the very people whose relationships the acquirer is paying to keep. Companies that want to be attractive targets should start looking to define their compensation philosophy, standardize and document their incentive compensation plans, and ensure they have solid job descriptions. Salary mid-points and target total compensation should be anchored to market data, and indefensible gaps between people in the same role should be minimized or rectified.
