7/26/2018
TOM STEWART: Don Daseke has turned a Texas trucking firm into a billion dollar powerhouse. He'll share the secrets of how he's grown using mergers and acquisitions on the next episode of The Market That Moves America.
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ANNOUNCER: Welcome to The Market That Moves America, a podcast from the National Center for the Middle Market, which will educate you about the challenges facing mid-sized companies and help you take advantage of new opportunities.
TOM STEWART: Today's podcast brings us together with a man who's taken a small trucking company and turned it into a billion dollar king of the road. I'm Tom Stewart, the executive director of the National Center for the Middle Market at the Ohio State University Fisher College of Business. We're are the nation's leading research group studying mid-sized companies, which account for a third of private sector employment and GDP and the lion's share of economic growth. It's The Market That Moves America.
The National Center for the Middle Market is a partnership between Ohio State and SunTrust Banks, Grant Thornton LLP, and Cisco Systems. And a special guest is with me today. Don Daseke, who's the chief executive officer of the transportation company that bears his name, headquartered just outside Dallas, Texas. Don, welcome to The Market That Moves America.
DON DASEKE: Well, thank you. It's great to be with you.
TOM STEWART: Don, Daseke is a company coming up on a billion dollars a year in annual revenue. And your business is flatbed trucking. Tell us a little bit about the business. What makes flatbed trucking different from other segments of the transportation biz?
DON DASEKE: Well, our unique niche is that we move the industrial products made by Boeing and General Electric and Georgia-Pacific and all the big industrial companies. We don't move the consumer goods going to Target or Walmart. So our trucks are big. And the things we move are cumbersome, bulky, long, heavy, pieces for refineries, enormous construction equipment, building materials, steel. Anything that big and heavy, we move for all the big companies around the country.
TOM STEWART: And it's all that stuff that's strapped on the back of a truck rather than stacked up in a bunch of containers, is that right?
DON DASEKE: That's absolutely correct. There are heavy straps and tarps on some of the loads. Some loads are so big or cumbersome you can't even put a tarp over it. We haul wind turbine blades for wind farms, and they're 180 feet long. So what we haul is just very different. It's industrial materials, not the consumer goods.
TOM STEWART: Does any company compete in both flatbed and container trucking? Or is it really a distinct set of capabilities and customers?
DON DASEKE: Well, we're the largest owner of flatbed and specialized equipment in the country. But we have an estimated only 3% to 4% of the market. There are literally thousands of small companies that may own one flatbed or five flatbeds that move things like we move, obviously in lesser volume than we do. I would expect our volume to be a billion and a half-- our revenue to be over a billion and a half this year. So we just moved more of these things than anybody else. But we're in a very fragmented market with lots of small companies.
TOM STEWART: You know, it's kind of surprising in this day and age to find what is it, a $100 billion business, or any industry like that, that is so fragmented. And if you're the biggest player and you've got less than 3%, that's kind of unusual. Is there something about flatbed trucking that makes it resistant to scale? Or is it just that it's taken a while to figure out how to build a big competitor in the industry?
DON DASEKE: I think there is something that's made it resistant to scale. Typically, the companies in this business are family companies. They are located in small towns. And the family has been in the business a long time. They're kind of happy with their little niche of the trucking business.
Our kind of trunking is more hands on and that you do have to tarp loads. You have to chain loads down. You have to make certain the load is sitting just right on the equipment, so that when the truck takes a turn, a curve, nothing is going to go off the truck.
So it is definitely-- you need drivers that know more about trucking, about specialized trucking. The drivers really aren't interchangeable. There's extra skills required for our drivers. And even if it's 30 degrees out or 120 degrees out, drivers still have to climb on top of the flatbed and do different things. So it requires additional driver skills, additional jobs to make certain that our loads are secure. But I think the family ownership of the small companies in this business have really resisted consolidation in the past years.
TOM STEWART: And yet, you've sort of-- first of all, what I think you've described is so fascinating to me because it makes it feel like a craft, like an art, like this is the kind of trucking that you need a lot of hands on, a lot of climbing on, a lot of experience and practice to do right. So it sounds like it's like the human capital builds up over time in this industry and, I suspect, also, deep relationships with your customers. Again, the paradox of having big customers like GE and Georgia-Pacific and small companies, you don't often see that.
DON DASEKE: No, I agree. I agree. Our customer relationships are typically all over 20 years, some much longer. We've got one customer that we've moved everything that they produce for 60 years. And they make big pieces going into parking garages and new stadiums, so these enormous concrete pieces. And they've used nobody else but one of the Daseke family of companies.
So we're a family companies. We've got 17 companies that have joined us over the past 10 years. And we've gone from $30 million in revenue in '09 to over a billion and a half this year. But it's totally focused on this niche of flatbed and specialized trucking.
TOM STEWART: So you've cracked the code or mixed the secret sauce, I guess, of growing in this business by acquisition. I mean, you've obviously grown organically, as well. But as you said, over the years, over the last 18 years, you've grown from $30 million to a billion and a half and mostly by acquiring. How have you done that?
DON DASEKE: Well, the unique thing we've done is that we've respected the legacy of the families. And we have focused on acquiring not-for-sale companies. So what we mean there are they are companies that are profitable, successful, have a proud history. Typically, most of our companies that join Daseke are over 50 years old and they've had the same family running it for those 50 years.
Well, we don't change the management. We don't lay off any people. We keep the family name on the trucks. And that means a lot. And the typical Wall Street strategy is that you smash companies together, create efficiency, which means laying off people, and in the process, you destroy the culture that has made that company. We're very conscious to not change things at the company to maintain that culture, maintain that leadership, because that's what made the company successful.
TOM STEWART: I would suspect that, under those circumstances, you would want to make sure to look for companies whose culture fits what you already-- fits in. So there's a lot of-- how do you do that cultural due diligence, I guess?
DON DASEKE: And that's really the key. We want a management team that cares deeply about their people and how long their people have been there in that company. And if they're passionate about their people and they're passionate about their customers, then it's probably the right company for us. So some Wall Street people with a computer program would focus on the numbers first. Instead, we focus on the people first.
TOM STEWART: Have you ever screwed up? I mean, you made 17 acquisitions. Has that formula worked every time? Or maybe another way of looking at it is, over those acquisitions, have you learn how to do this better and better? What have you learned? What have you learned?
DON DASEKE: Yes. But we've learned that we need to make certain there is an emotional owner of the company that the people are following in that company.
TOM STEWART: What do you mean by an emotional owner?
DON DASEKE: Well, it's a leader that is passionate about the people, and the people are passionate about working for that company. And we did make one mistake. And of all of the 17 companies that have joined us over those 10 years, we've only had to replace one CEO. That's very unusual because, typically, when companies merge, within two years, 60% of the CEOs are gone. That's kind of a national average.
And that's because, when companies merge, things change. The new management starts changing things. And the CEO doesn't like the changes, doesn't feel comfortable with the changes, so he leaves. And then, other people leave. So we just try to work very hard at making sure we take care of the people in each one of the companies that join us. And it starts with the CEO. And so with that one exception, all of the CEOs in the companies that have joined us are still with us. And so that's very unique.
TOM STEWART: So you talked about buying companies that aren't for sale. How do you persuade them to sell?
DON DASEKE: Well, we convince them that we're a family and that we will respect their logos. We will respect all their people. And we won't lay off any of their people. And they say, oh, well, that's great because I've got Susie in accounts payable that has been with me 20 years. I've got this person in maintenance, this person in safety, this leader for drivers, and they've all been with me a very long time, and I really care about those people. Well, they'll all keep their jobs as part of joining us. Well, that's a big deal.
TOM STEWART: That takes care of the downside, but what's the upside?
DON DASEKE: Well, the upside is that we give them stock in Daseke. And so they've got some financial upside. Typically, we find families that have 95% of their net worth sitting in this company, this private company, with no way to ever get any money out. And their financial consultant says, oh, that's not prudent to have all your net worth in one company. And we say, well, we'll give you some cash as part of joining Daseke. Oh, that'll be great. Then, it gives me an ability to diversify.
Another big upside is that a small trucking company runs the risk of a bad accident. We're in a litigious society. Bad accidents happen. And in front of a jury, the trucking company are typically the bad guys. And so a bad judgment against the trucking company can occur. Well, a small trucking company can't get much in liability insurance. It's typically only $5 or $10 million policy.
A bad jury award can be far more than $5 or $10 million. We have a $100 million of liability coverage. So the liability exposure of this small company goes away when they join the Daseke team.
TOM STEWART: So this story is just a remarkable story. Again, as you said, from $30 million to a billion and a half in 18 years. And I can't do that math, but what? It's 20 times-- it's a lot. It's a tremendous story of growth, and a story of growth with, I guess you might say, a human capital-oriented as opposed to a financial capital-oriented M&A strategy.
What lessons would you give? I mean, you've also got a special business with deep relationships and a real value in long-lived employees. What advice would you give to, or have you given to, other CEOs as they embark on, maybe, their first or second acquisition?
DON DASEKE: Well, it really comes back to the people focus. I have my motto on my business card, at the bottom of my business card. And it says, "Investing in people." And I think that some CEOs get angled up with focusing on plants and equipment and numbers. And they forget about what really makes a business successful.
What's the difference in a business? And it's the people. Anybody can buy equipment or facilities, but the people make the difference. They make the difference with customers. They make the difference in your employee turnover. And in this era where we've got very low unemployment, it's darn important, more so than ever, to retain the best people. And if you've got the best management that cares about the people, you will be successful.
TOM STEWART: And that's the words, "investing in people," of Don Daseke, who is the CEO and the founder CEO of the trucking and transportation distribution company that bears his name. Don, thank you so much for joining us today on The Market That Moves America. You can learn more about the company at daseke.com. That's D-A-S-E-K-E.com. And, Don, any final words before I sign off?
DON DASEKE: No. It's great to be with you today. And I do hope some of your listeners focus more on their people as a result of this discussion. Because I truly believe I've found that people make all the difference.
TOM STEWART: Well, certainly, great leaders can make a tremendous difference to the companies they run and the people who work with them and for them. So Don, thank you. And thank you all for listening to The Market That Moves America. Never miss a new episode. You can subscribe to the podcast on iTunes, Google Play, Stitcher, or wherever fine podcasts are found. Or you can subscribe and learn more about us at our website site, which is middlemarketcenter.org.
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