M&A: Multiplying Multiples
MLPs, spinoffs, low interest rates spark higher convenience store valuations, new M&A fever
Hot Markets for Retail in 2014
In determining what areas of the country were ripe for retail heat in 2014, real-estate consultancy Buxton, Fort Worth, Texas, says one mitigating factor is population migration. Citing 2010 U.S. Census data, it said the 10 fastest-growing “metropolitan statistical areas” over the past 10 years were primarily in the South and West, in states such as Florida, Utah, North Carolina and Texas.
Citing Los Angeles-based IBIS World, Buxton says the majority of real-estate activity going forward will likely take place in the Mid-Atlantic, West and Southeast.
Buxton researchers said they examined 2013 site scores run by a sample of approximately 100 current clients, primarily in the retail and restaurant industries, and identified markets drawing interest for potential investment in the coming year. These markets are:
▶ Dallas/Fort Worth
▶ Austin, Texas
▶ Los Angeles
▶ San Francisco
▶ The Northeast corridor (New York City, Boston, etc.)
Other large markets also generating interest include Minneapolis; Milwaukee; Portland, Ore.; Denver; Salt Lake City; St. Louis; Kansas City, Mo.; and Nashville, Tenn.
North Carolina continues to grow. There was a heavy concentration of site scores in Charlotte, Raleigh and surrounding cities. And in a much-needed good report for the bankrupt Motor City, retailers examined a large number of sites in the Detroit area, the Buxton research indicated.
A Seller’s Advice
Retailers looking to take advantage of growing multiples must still take the time to plan ahead, according to Jeff Kramer of Kramer Strategic LLC, Denver. He suggests several steps to take:
▶ Review tax options. Retailers can do many things to save on or defer taxes in light of any deal, he says. For instance, sometimes a buyer is more interested in taking over an operation, so leasing the land may be a better way to go in terms of taxes.
▶ Review all environmental issues. Planning on this matter is instrumental. Many concerns can be mitigated by tools such as new, creative insurance policies.
▶ Keep up with potential transaction partners. They may not want to do a deal today, yet they may decide to do so in the future.
▶ Know what you can do well. To maintain the value of any business, retailers need to know what they do well so they can guard that quality against the competition.
Kramer has faith that knowledgeable retailers can thrive, even against the most formidable competitors: “You can have a phenomenal niche in the most competitive market.”