Will C-store Industry M&A Slow Down in 2020?
NATIONAL REPORT — According to industry experts, the convenience channel has seen more consolidation in the past few years than in its previous 20 years, and 2020 is not likely to buck this trend as financing continues to be readily available and interest rates remain at all-time lows.
"Whether the deal is pristine, average or challenging, there are ready, willing and able buyers across the country ready to step up and make an acquisition," Mark Radosevich, president of PetroActive Real Estate Services LLC, told Convenience Store News
2019 was a strong year for both sellers and buyers. On the seller side, several small- to midsize retailers opted to exit the industry and cash out while the numbers worked in their favor.
Larger companies that may have been on the fence about selling saw "the market was so robust and frothy that they decided there would never be a better time to sell," noted Dennis Ruben, executive managing director of NRC Realty & Capital Advisors.
On the buyer side, acquirers continue to look for good real estate, good corners with a good stable cash flow that is consistent, and a good food program, according to Ruben.
Terry Monroe of American Business Brokers & Advisors believes there’s never been a better time to be a buyer or a seller. And looking ahead, he anticipates 2020 will be an even more active year.
"It is the best time for a seller because the value of their stores has never been higher and the tax climate has never been better. Meaning you can get top dollar for your stores and pay less in taxes and put more money in your pocket," explained Monroe.
"For a buyer, it has never been a better time, too, because you have lots of available money that is the cheapest we have ever seen,” he added. “Yes, you have to pay a little more for your acquisition because values are high, but you get more for your money. And what difference does it make if you have to pay a little more, but you get what you want and you plan on keeping the stores for many years to come?"
2020 is likely to see a similar pace in terms of consolidation, Ruben agrees. Although he does foresee this year having one key differentiator: a lack of large-scale deals.
"Where I see 2020 being a little different is there are not that many big deals left and the ones that are out there, I don't think are sellers," he said. "What we are doing, and what some of our competitors in the advisory space are doing, is going down to the next group of players to take advantage of the M&A marketplace.”
This group consists of midsize operators — companies with 10 to 75 stores.
"They typically have difficulty competing with the larger players. Let's face it, it's getting more difficult as the big players get bigger. Couple that with a desire to get out of the retail side of the business, or a family-owned company that lacks a succession plan," Ruben said.
This shift to midsize players and smaller operators was also seen last year, and Monroe agrees it will continue. He anticipates the 2020 focus being on players with fewer than 100 stores.