The Post-Acquisition Playbook: Strategies for Merging With Smaller Chains
The convenience store industry is undergoing a period of consolidation driven by high-profile mergers and acquisitions (M&A). Deals like the $47 billion bid by Laval, Quebec-based Alimentation Couche-Tard Inc., Circle K's parent company, for Irving, Texas-based 7-Eleven Inc., and Ankeny, Iowa-based Casey's General Stores Inc.' acquisition of 198 CEFCO locations — its largest deal to date — underscore the growing trend of c-store chains expanding their footprints, diversifying offerings and unlocking new revenue streams.
Yet, while M&A holds significant growth potential, the work isn't over after the ink dries. For c-stores acquiring smaller chains, success requires more than inheriting an established business. It demands a thoughtful strategy to integrate business models, align information technology (IT) systems and unify organizational cultures.
The Unique Complexity of Post-Acquisition Integration
Acquiring a c-store chain is no small feat, especially for companies new to mergers and acquisitions. The complexities go far beyond signing the deal and merging physical locations. Acquiring companies must also align aspects, including fuel operations, retail processes and technology infrastructures. With so many areas of the business to merge, c-stores may be left uncertain about where to focus their efforts.
Additionally, many c-stores operate across multiple business lines, including retail fuel, wholesale supply and, in some cases, parent-company fuel distribution. Smaller acquired chains may need more mature operational and IT processes or could be located in regions with differing governance and regulatory requirements.
For example, Casey's General Stores recently entered the wholesale fuel business when it acquired CEFCO convenience stores, adding a new capability to its portfolio. This move requires Casey's to adapt its operations to manage wholesale supply, an area where CEFCO had more expertise. The acquisition also expanded Casey's presence into new regions, including Texas, Alabama, Florida and Mississippi — each presenting unique market challenges for the business.
Navigating these complexities often requires the support of partners with deep expertise in c-store operations, IT integration and organizational transformations. With the right guidance and a clear integration plan, c-stores can address these challenges and achieve long-term success.
Here are three successful strategies for seamless integration:
1. Prioritize cultural integration
One of the most misunderstood aspects of post-acquisition integration is recognizing and respecting the culture of the acquired organization. Whether it's expertise in foodservice, customer relationships or inventory management, these businesses have been successful for a reason and overlooking their strengths can undermine the value they bring to the acquisition.
If the acquiring company pushes its own processes, systems or culture without understanding the acquired entity, it risks losing what made that business thrive in the first place. When Yesway acquired Allsup's, they retained the Allsup's brand, recognizing its iconic local identity and offerings like the Allsup's burrito, but enhanced other areas of operations such as creating a loyalty program.
Similarly, when 7-Eleven acquired Sunoco, they retained the Laredo Taco Co. brand and expanded it to other 7-Eleven stores, thereby strengthening their food offerings.
While advancements in artificial intelligence (AI) can assist in mapping operational structures or analyzing workflows, cultural integration remains a human-driven process. This process must begin with a thorough understanding of the acquired organization's culture, including how employees communicate and collaborate internally. A cultural assessment can help identify best practices to retain, both from an operational and employee engagement standpoint, ultimately building trust and ensuring integration efforts complement — rather than overshadow — the acquired chain's strongest attributes.
2. Build an integration strategy aligned with business goals
A successful integration starts with a clear strategy that aligns business goals across all levels of the organization, ensuring a cohesive approach to post-acquisition success. This involves streamlining operations by aligning physical and digital stores to enhance efficiency and improve customer engagement. Standardizing and redesigning processes fosters cross-functional collaboration and promotes continuous improvement. The key is to simplify workflows for the integrated business while creating efficient, automated business functions that support long-term growth.
From a technical standpoint, the integration strategy should include enterprise architecture guiding principles from an expert to design IT, application and data frameworks. These partners will take the time to understand and implement the best-fit applications, data systems and infrastructure to fully harness the operational efficiencies of the acquisition. Don't forget to align the IT integration strategy with the overarching business roadmap to minimize disruptions and ensure a smooth transition. For instance, IT integration will help migrate employee information from the acquired entity into the parent company's systems, aligning HR and payroll seamlessly within operations.
3. Focus on organizational change management and governance
Setting up effective governance frameworks is essential to reducing risks during post-acquisition integration. For example, failing to address compliance protocols in a newly acquired entity could lead to regulatory fines, while unclear communication about job security may cause employees to leave, taking valuable knowledge with them. The acquiring company must define roles, responsibilities and teams at both the deal and parent company levels to drive productivity. That also means providing the right support to the acquired entity, which requires a thorough introspection of audit findings, addressing identified issues and performing comprehensive vulnerability assessments before merging systems. These proactive measures help establish a secure foundation and protect both the parent company and the acquired business from potential risks.
Bringing two businesses together after an acquisition offers exciting opportunities, but it's rarely a simple task. Success requires careful planning, clear goals and respect for what makes each company unique. Ultimately, each business depends on the other to thrive and an effective M&A playbook led by experienced partners is critical to unite the best of both companies, opening new doors after closing the deal.
Cham Silvy is assistant vice president and strategic business unit head, Retail Markets, at Cognizant. He is responsible for overseeing commercial relationships in the South and Central Region of the United States and Mexico. He currently leads the convenience retail practice, positioning Cognizant as a top service provider.
Editor's note: The opinions expressed in this column are the author's and do not necessarily reflect the views of Convenience Store News.