Learn how to buy businesses in 5-minutes or less, once a week. Lessons & specific tactics on how invest your money and generate cash flow for your life.
🔑 JP Morgan's shipping empire, and how it broke into pieces
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Welcome to The Business Buying Academy with Sieva Kozinsky. 🔑 If you’re a business owner looking to improve cash flow, take 60 seconds to read this. It’s time to control your insurance costs. That’s why I recommend taking a look at WithCoverage. I know the team and trust their approach. Most business owners engage an insurance broker to get the “best deal”. But in my opinion, that’s a mistake. Traditional insurance brokers are paid on commission. When your premiums go up, so does their paycheck. It’s a misalignment of incentives. Not great if you're trying to run multiple lean, cash-flowing businesses like me. Let me tell you why WithCoverage is a better option. They charge a flat fee (not a commission). You get a dedicated risk management team of insurance experts and attorneys. They make 40+ A-rated carriers compete on price. (Versus 2 or 3 like traditional brokers). Here’s what one of their clients said: "20%+ cost reduction, better protection, and significant time savings. A total win-win for our portfolio companies and management teams." - Robbie Patterson, Partner, Asto Consumer Partners If you’re looking to save on insurance and put that money back into your business, I’d talk to WithCoverage. Get a free and confidential risk analysis from WithCoverage (Thanks to WithCoverage for sponsoring this newsletter.) 🔑 JP Morgan's shipping empire, and how it broke into pieces Logistics is a difficult business. JP Morgan, who made fortunes in steel, railroads, banking, electricity, and many other industries, had a rare miss trying to build a logistics company. He formed a shipping trust in 1902, only for it to go bankrupt in 1915. But the story doesn't end there. A portion of that shipping business survived past bankruptcy and operated for several more decades, only to be caught up in yet another high-profile bankruptcy 71 years later. The Shipping Opportunity In the early years of the 20th century, industrialists were frantically investing in and building factories. J. Pierpont Morgan was among them. But he spotted an opportunity many of them missed: North Atlantic shipping. The business of shipping cargo and passengers between the US and Europe was chaotic. Shipping rates swung wildly with competition, immigration surges, and seasonal demand. Others had no idea how to manage the wild fluctuations in the shipping business. Shipping titans like Clement Griscom of the American and Red Star Lines argued that coordinated efforts between multiple shipping lines could stabilize trade. JP Morgan agreed. Already a master of railroads and the steel industry, Morgan supplied the capital and expertise to modernize shipping. The International Mercantile Marine Company (IMM) was formed in 1902 with J.P. Morgan’s backing. It started as a major shipping trust intended to dominate North Atlantic passenger and freight traffic by consolidating several leading American and British lines. Starting by acquiring the International Navigation Company (INC), which already operated the American Line and Red Star Line under Clement A. Griscom, Morgan’s firm financed the addition of other companies: the Atlantic Transport Line, the Leyland Line, the White Star Line, and the Dominion Line. The company was capitalized with $60 million in preferred stock, $60 million in common stock, and $50 million in 4.5% bonds. At formation it controlled more than 100 ships totaling about a million tons, representing about one-fifth of North Atlantic tonnage and a substantial share of passenger capacity. But the venture never achieved a true monopoly as the founders hoped. A U.S. shipping subsidy failed to materialize, competition persisted, and the company was overleveraged relative to its cash flow. The 1912 sinking of the Titanic (its White Star subsidiary’s flagship) damaged its reputation and leadership. IMM defaulted on bond interest and entered a receivership in 1915. World War I provided temporary relief, but in the 1920s–1930s it sold foreign assets (including White Star in 1927) and gradually consolidated remaining American operations. It merged with the Roosevelt Steamship Company in 1931 and ultimately evolved into the United States Lines. Shipping remained an inefficient and tough business for a couple more decades. Until one entrepreneur changed that.
"For thousands of years, people and societies all over the world have transported all kinds of cargo across the oceans in sailing ships...but the process was never easy. The loading and unloading of individual goods in barrels, sacks, and wooden crates was slow, complicated, and inefficient. Nevertheless, this process, known as break-bulk shipping, was the only known way to transport goods via sea up until the second half of the 20th century." - Seaport Museum Malcom McLean was a North Carolina trucking entrepreneur who, in the 1950s, pioneered containerization. Frustrated by the slow process of loading and unloading cargo, he bought the Pan-Atlantic Steamship Company, converted ships to carry truck trailers (later standardized containers), and launched the first true container voyage in 1956 with the Ideal X. He built Sea-Land Service into the world’s largest container operator. In 1969 he sold Sea-Land to R.J. Reynolds Industries for $530 million (netting about $160 million personally). After leaving Reynolds’ board in 1977, he looked for another major shipping opportunity. A New Era in Sea Shipping United States Lines traced its origins to the early 1920s and, through many reorganizations, was the main surviving American successor to J.P. Morgan’s 1902 International Mercantile Marine Company. It had operated famous passenger liners (including the SS United States) before shifting to cargo and containers after passenger service ended in 1969. By the mid-1970s it was a mid-sized U.S.-flag container operator running about 36 vessels on worldwide routes. Conglomerate Walter Kidde & Co. bought United States Lines for $104 million in 1969 but later described the purchase as a mistake; the line lost $1.5 million in 1970 and remained a chronic source of frustration. Kidde tried to sell it several times (including a blocked deal with R.J. Reynolds and a failed attempt with Western Union International). In April 1978 McLean acquired United States Lines from Kidde for $111 million, barely more than Kidde paid nine years earlier. The deal gave McLean a substantial U.S.-flag fleet, terminal assets, and operating rights at a time when he was seeking a new platform for large-scale container operations. He quickly expanded the company, later acquiring other lines (including Moore-McCormack) and ordering twelve very large, slow, fuel-efficient “Econships” from Daewoo in South Korea for a planned round-the-world service. The strategy assumed high oil prices would favor efficient ships. When oil prices fell and overcapacity hit the industry, the vessels proved poorly suited to the market. United States Lines (under McLean Industries) filed for bankruptcy in November 1986, one of the larger U.S. corporate collapses of the period, leading to the sale of the fleet and the effective end of the company. Sieva What did you think of today's newsletter? Rate this newsletter using the poll below: Disclaimer: nothing here is investment advice. Please do your own research. The information above is just for information and learning. |
Sieva Kozinsky
Learn how to buy businesses in 5-minutes or less, once a week. Lessons & specific tactics on how invest your money and generate cash flow for your life.
Welcome to The Business Buying Academy with Sieva Kozinsky. 🔑 If you’re a business owner looking to improve cash flow, take 60 seconds to read this. It’s time to control your insurance costs. That’s why I recommend taking a look at WithCoverage. I know the team and trust their approach. Most business owners engage an insurance broker to get the “best deal”. But in my opinion, that’s a mistake. Traditional insurance brokers are paid on commission. When your premiums go up, so does their...
Welcome to The Business Buying Academy with Sieva Kozinsky. 🔑 If you’re planning to buy a business in the next year, take 60 seconds to read this There’s one bill that almost never makes it into the deal model. It’s the workers’ comp audit. A few months after you close, the carrier checks payroll, job roles and subcontractor costs against what the last owner reported. If employees had the wrong class codes, or the payroll numbers were out of date, the carrier sends a bill. Sometimes a big...
Welcome to The Business Buying Academy with Sieva Kozinsky. 🔑 If you’re a business owner looking to improve cash flow, take 60 seconds to read this.It’s time to control your insurance costs. That’s why I recommend taking a look at WithCoverage. I know the team and trust their approach.Most business owners engage an insurance broker to get the “best deal”. But in my opinion, that’s a mistake. Traditional insurance brokers are paid on commission. When your premiums go up, so does their...