Making an Impact at M-PACT
Fuels and technology led the way at M-PACT 2016 — an acronym for the Midwest Petroleum and Convenience Tradeshow — in terms of both educational sessions and exhibitors sporting their wares on the show floor.
The regional tradeshow covering the states of Ohio, Kentucky, Illinois and Indiana, drew a large crowd to the Indiana Convention Center in Indianapolis from March 22–24. The annual spring event bills itself as the largest gathering place in the Midwest for energy and convenience industry leaders.
One topic presented with emphasis was credit card and debit card skimming at the pump, a big threat facing Midwestern retailers, and all retailers for that matter. Sandra Morgenstern, president of Par Mar Oil Co. and a 2015 Convenience Store News Woman of the Year, shared with M-PACT attendees how this topic hits home for her. Her 50-store convenience chain, based in Marietta, Ohio, suffered credit and debit card skimming at its pumps.
Hence, she was the perfect person to introduce “Skimming the Surface” session presenter Chris Ingram, an attorney with Vorys, Sater, Seymour and Pease LLP, who started off by pointing out that with an estimated 29 million Americans paying for gasoline with a debit or credit card at the pump every day, skimming will not go away anytime soon.
Skimmers are devices criminals use in an attempt to steal customer card information. C-stores located near interstate highways are most vulnerable to skimming crime rings, Ingram said.
“You can purchase skimming devices on the Internet. And with so many different varieties of skimmers, the sky is the limit,” he cautioned.
To make matters worse, criminals can install skimmers in just seconds and now have the ability to steal customer information via Bluetooth or text technology, as opposed to needing to return to the dispenser to remove the illegal device once the information has been captured.
If a c-store operator has been the victim of a skimming incident, Ingram said they should follow a nine-step protocol:
- Close the pump
- Do not touch the device
- Contact law enforcement
- Contact legal counsel
- Preserve relevant security footage
- Document actions taken by the retailer
- Review contracts for notice obligations
- Notify insurer, if applicable
- Notify affected individuals
Forty-seven states have notice-of-breach laws. Alabama, South Dakota and New Mexico are the exceptions. Laws vary by state, and several charge financial penalties for retailers who do not notify affected individuals of a breach.
To prevent further skimming incidents, Ingram recommended c-store retailers take the following steps: change to unique locks; install anti-tamper devices; install security cameras; use customized anti-tamper tape; train associates; and establish an inspection protocol.
In regards to training associates, the attorney explained that c-store operators can take any number of steps, such as providing photos of what both normal dispensers and dispensers with skimmers look like, as well ensuring inspection logs are completed.
THE M&A ENVIRONMENT
Fuels and technology topics were not the only focus at M-PACT. The merger and acquisition environment in the convenience store industry was another hot-button topic on the show floor and throughout the hallways of the tradeshow, and for good reason.
“There will never be a better time to be either a seller or buyer in the convenience store and gas industry,” Terry Monroe, founder and president of American Business Brokers & Advisors, told attendees during the “Retail Fuel Aggregation Landscape” educational session.
Although his statement may seem contradictory as it is seemingly difficult to be a great time for both parties, Monroe explained in his presentation that “money is so cheap.”
Still, he said although the environment is optimal right now, c-store retailers should not rush to sell their businesses. First, research must be conducted to determine fair market value for c-store assets, and interested sellers should know who may pay the most for their assets.
Convenience stores with real estate in the Midwest generally obtain a sales price of five to seven times EBITDA, or earnings before interest, tax, depreciation and amortization, while c-stores being sold without real estate generally garner two to three times EBITDA, according to Monroe. These multiples tend to be higher in other regions, he said, specifically c-stores located on the West Coast and in the Northeast.
Monroe emphasized that a c-store will not simply sell based on its cash flow. Whether or not a property sells depends on five factors:
- What’s the upside for the buyer?
- Where is the business located? Urban locations generally bring higher value.
- Is it branded or unbranded?
- What is the current competition?
- Is it a fee property or leased?
Once these questions are answered and a c-store operator decides to sell his or her business, they should make sure to hire an attorney experienced in such transactions, a tax accountant and an experienced intermediary, advised Monroe.
“Do not attempt to sell it yourself,” he emphasized. “You are not objective, are too close to it, and you won’t get as much value as you should. You also don’t know how to appraise the property fairly. Do-it-yourself selling will devour your time, and you don’t know how to find a qualified buyer.”
March 22–24, 2016 Indianapolis