Industry experts share their opinions and predictions regarding mergers and acquisitions in an exclusive CStore Decisions webinar.

CStore Decisions recently sat down with industry professionals Travis Smith and Terry Monroe in an exclusive webinar to discuss the ins and out of mergers and acquisitions (M&As). The webinar was moderated by CStore Decisions’ editor-in-chief Erin Del Conte.

Travis Smith is the co-founder and co-president of FR Refuel LLC, a Charleston, S.C.-based company that owns and operates around 225 locations in five states, mainly located throughout North Carolina, South Carolina, Mississippi and Arkansas. Terry Monroe is the president and founder of American Business Brokers & Advisors, a boutique firm which works with convenience stores and wholesalers across the country.

The webinar kicked off with the two experts sharing their opinions about what the landscape looks like for mergers and acquisitions in the future.

M&A Outlook

“I see that this industry’s been consolidating for a long time, and it probably picked up about three years ago. (For) the c-store industry, I think the pandemic kicked it in gear too,” started Monroe. “It’s continually consolidating. You’ve got the big chains getting bigger, they’ve got the infrastructure, they’ve got the HR department, they’ve got the environmental department, they’ve got the real estate department.”

Monroe and American Business Brokers & Advisors, however, are on the smaller side of operations, as he noted that the definition of a small versus large operator has changed considerably in recent years.

“(It) used to be if you had 25, 30 stores, you were a big operator. I’ve got operators now that have 50 stores and they’re too small,” he continued. “They can’t play in that space. They can’t create enough synergies to make it worth their while. Everything that we have touched in the last two years, it goes under contract, it gets sold.”

Smith sang a similar tune, emphasizing that consolidation is the future in the industry. He noted that operators need to recognize this and adapt to it as it continues to unfold.

“I think as operators look in the mirror and decide, okay, am I ready to buckle up and grow or do I not want to do that? They have a decision to make, and I think that more of them will find that there’s a buyer out there that will make them happy with an exit and it makes more sense for them to exit rather than to continue to grow or to start to grow,” Smith stated.

With that being said, retailers need to decide if they are going to either “grow or get out of the way.” Therefore, knowing how to do this is more important than ever.

“Buying, I think, is a different perspective obviously than selling. I think if you decide that you are going to become an acquirer, that it’s a lot of work and integrating acquisitions is probably the hardest part,” explained Smith. “So, I think that that’s something you have to think deeply about and strategize about and understand how you truly are going to execute.”

Smith continued to say that there are a variety of conditions to consider when acquiring or selling, such as the timing, the evaluation of the property and personal conflict, among others.

For Monroe, the sentiment Is the same, except it depends on “what hat you’re wearing.”

“If you’re a seller and you’re wearing a seller hat, you’ve got a lot to think,” noted Monroe. “But it’s really — I laughed about (this) earlier — I thought when I got in this business, it’d be all numbers and that was wrong. A lot of it’s numbers, but it’s emotional too. Is the time right?”

Monroe explained that every business has a different value based on three items: the location, the quality of the assets and the cashflow. These are all aspects of a sale that need to be focused on, both as a buyer and a seller.

Mindful Considerations

When divesting stores in today’s economy, retailers will have a lot to consider. Smith mentioned that understanding the market you are entering and being well-informed about the decision is extremely important.

“What we look at is what is it worth to us and what does it make sense for us to pay? And that’s how we make offers and generally they’re in line,” he stated. “Obviously, I don’t think we would’ve completed 16 acquisitions over the past four and a half years if we were way off base on valuations, but we have to get comfortable that we’re paying a fair price and that’s what we want.”

As retailers evaluate each sale they make, due diligence is necessary and research needs to be strong. When it comes to what to watch for, Monroe mentioned that the most important starting point is knowing your worth.

“Everybody generally knows what their house is worth, what their car is worth, maybe some real estate, but their biggest financial asset that they have is generally their business, and they don’t have a clue what it’s worth,” he noted. “And they say, why should I do this? Because I’m not going to sell it anyway. Well, no, you’re not going to sell it, but you still should know what it’s worth instead of what your buddies told you or what you read that somebody did across the country.”

Out-of-State Expansions

While in-state acquisitions can bring their fair share of hurdles, expanding operations to new states can be even more burdensome.

“Any time you enter a new state, there are things that you’ve got to do. Every state does things a little differently, but generally you’re going after the same things from a permitting perspective,” Smith said. “And then being able to do business — being able to buy fuel, haul fuel if you’re hauling your own fuel, there is all of that that goes there. I think that once you get that down in a state, you can easily add locations with ease.”

Monroe stated that what Travis said was accurate, but also added that another aspect to consider is the particular state in which you would like to expand.

“First of all, it must be a business-friendly state,” he noted. “That was the first thing that came to mind. And the next thing is, is it a growth area? Is it a growing state or is it a declining state?”

While there are countless factors to consider when buying or selling a business, industry experts like Monroe and Smith can be incredibly useful resources for c-store retailers looking to “grow or get out of the way.”

Watch the full CStore Decisions webinar at this link.

By CStore Decisions | Kevin McIntyre | February 15, 2024 This article first appeared CStore Decisions Webinar – M&A Planning & Integration in 2024