Why Now Is ‘Perfect Storm’ for C-store Industry M&A: Part 1

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Why Now Is ‘Perfect Storm’ for C-store Industry M&A: Part 1

By Tammy Mastroberte, Convenience Store News - 03/02/2016

NATIONAL REPORT — The past year has seen several long-standing convenience store chain operators suddenly selling off their assets and exiting the business altogether. Why?

According to Dennis Ruben, executive managing director of Chicago-based NRC Realty & Capital Advisors LLC, it is the “perfect storm of circumstances.”

“There are low gas prices, but also record margins. People are seeing margins they have not seen in a long time on fuel, so they are making more money. Customers are also spending more money in the store because gas prices are so low,” he told Convenience Store News.

This has piqued the interest of buyers — and not just those in the c-store industry — and hence, large amounts of money are on the table.

Companies that were thinking about selling in the past have realized with interest rates as low as they are, the offers coming in now for their businesses will not last forever.

“With the numbers being presented, it would be foolish not to think about it,” said Ruben. “People are looking at the market and the numbers, and are not sure it will be like this again. Interest rates will go up soon, so the time couldn’t be better to sell.”

Also, statistics show 10,000 baby boomers are retiring every day and that includes some convenience store owners. Operators contemplating retirement are taking the opportunity to get out sooner rather than later, noted Terry Monroe of American Business Brokers & Advisors, based in Effingham, Ill.

“They are now seeing they can get more money for their chains than they ever thought possible,” Monroe said.

Sellers are getting offers higher than they have seen in years, particularly as large private equity firms are acquiring more c-store industry assets than in the past. One example is Fortress Investment Group Inc., which owned United Oil Co. and purchased Pacific Convenience & Fuels in June of last year to form the new United Pacific.

“Right now, money is cheap, and it will never get this cheap again,” Monroe explained. “We are getting a lot of calls from real estate equity companies and financial buyers that want to invest in a cash business that is still growing and can give great returns. The c-store business fits that [criteria].”

Click here for Part 2 of this report, focusing on today’s buyers.