Convenience Store News - July 2018 - 50
been picky about their exit timing now may
be looking favorably at exiting, the Downstream Energy Partners exec pointed out.
"Recent financial results have been stronger
than normal, particularly with fuel margins
boosting EBITDA, and while the sale multiples seem to be holding, market conditions
are positive for those exiting," he said, adding that crude price increases foretell a fall
in fuel pool margins with a commensurate
drop in EBITDA, correspondingly reducing
There is another factor behind the M&A push:
the relative cost and time requirements of
buying vs. building. "Even at today's multiples, it is cheaper and faster to buy than
to build. This strategy works well for chains
that can adapt their business model to the
acquired sites," Montgomery said.
Big players are also seeing big opportunities in taking over companies that are
accretive to earnings, and low corporate
tax rates are resulting in more liquidity to
do so, according to Dennis Ruben, executive managing director of NRC Realty &
Capital Advisors LLC.
"People have more liquidity to do acqui-
NEW ADDITIONS TO THE LIST
* EG Group, Cincinnati
* Cal's Convenience Inc., Frisco, Texas
* Enmarket Inc., Savannah, Ga.
* Pester Marketing Co., Denver
* Empire Petroleum Partners LLC, Dallas
* Turn Outz Inc., Roanoke, Va.
* Sunmart Inc., Spring, Texas
* Clarks Pump N Shop Inc., Ashland, Ky.
Source: Nielsen TDLinx, Convenience Store News Market Research
sitions - not just the big players; everyone's looking out
for things," Ruben told CSNews. "People have come to us
asking what we have that they can look at. We're seeing a
lot more of that."
Grow or Go?
A lot of smaller companies are looking to buy or sell - it
cuts both ways, said Ruben.
"Because the big guys are getting bigger, the smaller guys
are looking to see how they can compete. Some are saying
maybe it's time to get out," he explained.
Smaller regional chains that have the financial flexibility and ability to expand, and have made the strategic
investments necessary to compete with the larger
consolidators such as 7-Eleven, realize that acquiring a
competitor can be one of the quickest and most costeffective methods to expand their existing retail footprint,
explained Petroleum Capital & Real Estate's Sartory.
7-Eleven, Couche-Tard, Speedway, etc., are not interested
in every M&A opportunity for a variety of strategic, geographic and operational reasons and, as a result, they
are not going to bid on every acquisition opportunity.
For example, an opportunity that contains a number of
dealer-operated sites is most likely not going to interest
a number of the larger consolidators that are primarily
focused on acquiring larger company-operated sites.
Instead, Sartory said these type of acquisition opportunities
are prime targets for smaller operators that have the ability
and financial flexibility to expand, and the strategic patience
to rationalize and improve the retail assets acquired.
In its representation of sellers, Downstream Energy Partners has seen middle-tier competitors (under 125 stores)
bid assertively to grow their footprints, particularly for
assets they believe to be strategic.
"The middle tier understands they, too, must grow to
defend their markets, or exit," Griffin said.
Smaller chains feeling the need to go big or go home
can effectively compete in the M&A arena, but they need
to address four basic strategy considerations, according
* Who are their target customers?
* What are the need states they want to fulfill?
* What retailers are in their customers' consideration set(s)?
* What are their points of differentiation?
The latter may be the most important. "They need to
become more of a destination and less of a 'me too'
retailer," Montgomery advised.
Positioning for Acquisition
It's possible some of the moves by smaller chains up the
Top 100 ladder may represent a strategic play to make
themselves an attractive acquisition target.
50 Convenience Store News C S N E W S . c o m