To expand or not to expand - that is the question. Better yet what financial implications should be considered when one has a healthy, growing organization that needs to make long-term decisions that will benefit the organization most effectively? This is the matter that Huffman Trucking is facing today. Huffman's management team has consistently brainstormed three potential strategies. Each strategy presents its own strengths, weaknesses, and threats. Huffman has deliberated going public by way of offering an IPO, researching the industry in an attempt to acquire a like company, or considering a merger with another company. This paper will compare and contrast the positive and negative implications behind these three business expansion ideas.
Brief BackgroundHuffman Trucking was founded by K. Huffman of Cleveland Ohio in 1936. The company started with a single tractor-trailer. The growth of Huffman was known to be directly related to World War II and the enhanced demand for carrier services between factories in the Midwest to ports on the East Coast (rEsource, 2008).Due
to Huffman's consistent growth over the years, they have been able to remain a privately held company, however, they are exploring opportunities that will further expand the business.
Huffman Trucking's primary customers are the U.S. Government, automotive parts suppliers, electronic consumer's products, raw materials for manufacturers of plastic products, and various other customers requiring special accommodations such as wine, computers, and munitions. Presently, Huffman is operating four facilities in four different states across the U.S. They own and operate 800 road tractors, 2,100 trailers, and 260 roll-on/roll-off units (rEsource, 2008).
Three OptionsAn Initial Public Offering (IPO) occurs when a private company first offers its stocks for purchase to the public (Keown, Arthur, Petty, and Scott, 2005, p11). This sale occurs on the primary market. This process is often referred to as going public.