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NACS SHOW REWIND: Despite Uncertainty, M&A Is Alive & Well

Refuel Operating Co. and Kent Kwik Convenience Stores are still in the buying mood.
Melissa Kress
Travis Smith of Refuel (left) and Bill Kent of Kent Kwik Convenience Stores
Travis Smith of Refuel (left) and Bill Kent of Kent Kwik Convenience Stores

ATLANTA — Merger and acquisition (M&A) plays have been at the forefront of the convenience channel for the past several years but with uncertainty ruling the market today, the M&A environment is nothing if not interesting.

"M&A is a transformation of many different ideas because the business changes and you've got to change with it," Jeff Kramer, managing director at NRC Realty & Capital Advisors, pointed out during a 2023NACS Show education session entitled, "Strategic Planning and M&A in a Slow or No-Growth Environment."

With the consumer sitting firmly at the center of the convenience proposition, Kramer noted it is important to understand what is going on with today's shopper. Following a growth period around the COVID-19 pandemic, inflation hit followed by rising interest rates — which may still inch higher — the U.S. economy is not technically in a recession, but it is not far from it.

Add to the mix a changing geopolitical landscape, like the push toward an electric vehicle (EV) future, and it begs the question, should sellers in the convenience channel be concerned?

[Read more: Small Operators Face Several Factors When Weighing M&A Options]

According to Travis Smith, chief development officer at Charleston, S.C.-based Refuel Operating Co., outside factors aside, the channel is in the business of convenience and gas. That business may have evolved over time — from one pump sites with a service bay selling carbonated soft drinks to 1,500-square-foot stores to today's 8,000-square-foot sites.

"Even with the geopolitical onslaught of EVs and the economy, I think that as long as a store operator evolves with that evolution, they will be okay. Do I think it's a great time to sell? Of course I do, but I'm in the business of buying companies," he said.

Bill Kent, Chairman and CEO of Midland, Texas-based Kent Kwik Convenience Stores agreed. "We tend to be like cockroaches. We live through a nuclear war," he said. "We do well in really good times and we do well in really bad times."

However, as Smith added, a seller's perspective comes down to other factors: a succession plan, or lack of; retirement; or illness.

What does an acquirer look for? Does the name on the forecourt matter, Kramer posed. According to Kent, his company does not focus too much on branded vs. unbranded. The company does, however, focus on the structure of any branded contract.

"We look at what the brand structure is, if there's a lot of contract issues, if there's money owed. We look at it from more of a financial standpoint than we do the brand because we know what we plan," he noted.

As Smith pointed out, "a good asset is a good asset, regardless of brand."

Another important aspect of the channel that may not necessarily play an important role in M&A from an acquirer's perspective is foodservice. The category did factor into Refuel's decision to buy Indianola, Miss.-based Double Quick, which was well-known for its fried chicken program, Smith pointed out. 

"That was a strategic decision for us. We used that as a catapult to really get fried chicken in the majority of our stores," he said, adding that the company also looks at the capabilities of putting foodservice into locations when mulling an acquisition.

"It goes down to even things as simple as what's the square footage of the location, can we put our full-service kitchen in there?" he explained. "A good food program is great if it's got traffic and we like that business. I would think it enhances a potential asset for us, but we're really looking at the capability of putting our [own foodservice in the store]."

Regardless of fuel brand, foodservice programs and fluctuating economic conditions, the retailers agree the M&A environment is still strong. "There are still buyers out there and there are still sellers out there," Kent said. "I don't see anything that concerns me too much. I think it is still a good time. Would l love interest rates to be lower? Yes, but it is still a good time."

Smith echoed Kent's opinion on M&A. "As long as the debt markets stay open, which they are open, you will see M&A in our space. I would say that maybe deal flow has slowed down a little bit this year, but I don't believe that it's because there's not buyers out there for those assets. There's actually seems to be an increase in the amount of buyers," he said, adding Refuel will pay a fair price for good assets in its existing footprint and tuck-in acquisitions.

The 2023 NACS Show took place Oct. 3-6 at the Georgia World Congress Center in Atlanta. The 2024 NACS Show will be hosted at the Las Vegas Convention Center Oct. 7-10, 2024.

About the Author

Melissa Kress

Melissa Kress

Melissa Kress is Executive Editor of Convenience Store News. She joined the brand in 2010. Melissa handles much of CSNews' hard news coverage, such as mergers and acquisitions and company financial reports, and the technology beat. She is also one of the industry's leading media experts on the tobacco category.

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