Petrogram - Summer 2009 - (Page 21)
Out & About THE INDUSTRY In with the New, Out with the Old Growth and finance prognostications for 2009 o here we are in 2009, and given the level of early activity, we’re guardedly optimistic about the future of the petroleum finance Mark Radosevich and mergers and acquisitions business. Heaven knows our industry needs some positive activity. On the ﬁnance side, things may improve as banks begin to realize that convenience stores are currently a lower risk proposition versus other retail businesses that are failing left and right. Our mutual challenge is to broadly communicate these facts across the ﬁnancial community to move our industry from a niche or specialty ﬁnance area into the mainstream. Although the level is signiﬁcantly diminished from past years, there are still lenders out there that were not caught up in the subprime mess and that are ﬁnancing acquisitions. Because they are working within a lower competitive environment, they are scrutinizing the deals to a greater level and are oﬀering lower loan-to-value proceeds at somewhat higher interest rates. This will require buyers to invest higher levels of equity or sellers to oﬀer ﬁnancing in support of the deals. On the plus side, seller ﬁnancing may yield signiﬁcant tax savings depending upon the sellers’ capital gains situation and amount of proceeds to be garnered from the sale. Depending upon the size of the transaction and as other non-petroleum real estate ﬁnancing options continue to moderate, expect to see a greater level of mezzanine lenders enter the picture to support larger acquisitions. They will S charge higher fees and interest rates and may want to participate in the deal. On the ﬂip side, they can be counted on to close on time and will want to exit the picture in a relatively short period of time. Although expensive, marketers will ﬁnd them to be less obtrusive than equity investors who will want to inﬂuence a company’s decision making. The proﬁtability of an acquisition and synergy with the existing organization is the key to assessing whether the use of mezzanine money makes sense. On the mergers and acquisition side, expect increased activity in the areas of marketer divestitures and exiting as the disruptions caused by the oil company retail sell-oﬀs come to a close and the acquisition environment returns to a more stable situation. Short-term fuel margin enrichment will diminish to traditional levels, and marketers on the exiting fence will realize that trying to time a business sale by staying temporarily in the game, risks diminishing current value, versus taking one’s chips oﬀ the table in 2009. We also expect to see an increasing level of marketer divestitures of marginal sites, in an eﬀort to optimize the value and proﬁtability of their respective retail networks. Direct salary operations of seasoned retail sites with inside sales below $50,000 will come onto the market in higher levels than in the past. The challenge will be to develop a stable of qualiﬁed dealers to buy or lease the sites. Sites with the greatest marketability are the ones where dealers can ﬁnd the “up-side” and enhance the historic inside sales performance. Likewise, sales of marginal sites for alternate uses outside the petroleum industry will not be a factor in 2009, with few viable buyers and low demand by the ones that haven’t been greatly impacted by the tough economic climate. Thus it’s safe to say that the number of vacant retail petroleum sites littering the highways and byways of America will continue to grow as the divestitures of obsolete units unfolds. ❍ Mark Radosevich is president and COO of PetroProperties & Finance, LLC, a company that offers confidential mergers and acquisition representation and growth financing services exclusively to the petroleum industry. He can be contacted tollfree at 866-357-2042, ext. 3, or at email@example.com. Petrogram | Summer 2009 | 21
Table of Contents for the Digital Edition of Petrogram - Summer 2009
Petrogram - Summer 2009
2009 Convention and Trade Show Information
What, Another Deadline?
Out & About the Industry
The Un-Comfort Zone with Robert Wilson
FDOT’s Attack on Business Damage
Crime Doesn’t Pay – Neither Should You
The HR Advisor
Meet New Member: WatchDog Calibration
Keep It Local
Index to Advertisers/ Advertisers.com
Petrogram - Summer 2009
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