BATH, U.K. — The scale of merger-and-acquisition (M&A) activity in the convenience and fuel retail industry has continued to accelerate as larger businesses grow the size and scale of their network by identifying geographic gaps in their store estate that can be filled through acquisition or organic growth. This is coming at a time of increasing pressure in the industry with rising labor costs, staff shortages and new customer checkout expectations. Margins can become tighter and smaller store estates may not have the agility to make the changes required.
The strategic decisions behind growth and expansion in new markets are well founded; however, technology can often be an afterthought in the due diligence process. Perhaps this is because IT has often been thought of as a support function rather than an enabler. The net result is that without the correct due diligence on technology at the outset, the value in acquisitions can be slower to be realized than planned and compromised.
Identify and Leverage Technology Synergies
Identifying technology synergies during M&A due diligence usually plays a major role in transforming future performance, setting the deal up for success. It’s essential that the CIO is involved early in the process to evaluate how you can leverage components in the tech stacks for driving operational efficiencies and innovation. Additionally, understanding how the crown jewels of each party can be quickly deployed across the other—a successful loyalty program, for instance—is key.
A number of influential factors will be assessed, including the digital capabilities and infrastructure of the acquired store estate, how complex the technology integration may be, how long the process may take and whether any of those processes can be automated—reducing site technician visits and downtime.
Successful synergies will accelerate value and minimize disruption to the business. Ideally, any new technology integration will avoid the cost of new hardware replacement, minimize new training for store associates and reduce the level of store technology complexity. Running different store technology systems is inefficient and expensive. Essentially, the aim is to have more efficient control of the tech in the store while delivering a leaner physical IT footprint. These are some of the core foundations that will influence the bottom line. So, how does one achieve this?
Get Your IT Infrastructure in Order
Unless a retailer’s infrastructure is up to date, it’s unlikely they will be able to take advantage of potential technology synergies. Many c-stores have legacy infrastructure with a variety of devices running different versions of application software. Combine that with a newly acquired store estate that will most likely have different applications and systems to those of the acquirer and the process of integration can become extremely complex, expensive and labor intensive. Worse still, any legacy compliance or security issues from either technology estate needs to be isolated and remediated.
Getting the IT house in order doesn’t mean ripping and replacing existing technology as legacy infrastructure is a common challenge. It simply means looking at innovative and cost-effective ways to make existing technology stacks more agile. Get this right at the outset and the ability to leverage synergies and speed up integration processes for newly acquired stores can be transformational.
Give Store Technology an Edge
A modern approach that can break down these barriers and drive agility is to virtualize existing applications at the edge. The growth trend in edge compute is vast with technology analysts, such as International Data Corp., predicting that by 2023, 50% of all enterprise technology infrastructure will be deployed at the edge rather than corporate data centers, and Gartner saying 75% of all data will be processed at the edge by 2025. The fact is, running applications closer to edge devices improves both performance and cost, even more so when retailers have many locations spread over a large geographic footprint like the convenience fuel retail industry.
Edge virtualization decouples device hardware from the software, enabling retailers to upgrade their existing store application software without the expense of hardware replacement. Modernizing store infrastructure in this way can prove a game changer for accelerating new store integrations post M&A. The existing in-store software, like point-of-sale (POS) systems, can now be run on devices in the newly acquired stores, without having to swap those devices out or run expensive and time-consuming asset validation. Management and maintenance of these devices can be carried out remotely from the cloud, reducing the need and cost of manual site technician visits. Post-merger integration lag and cost is effectively minimized, and IT once again becomes a business strategy enabler. Get this right and retailers have the platform for delivering new outcomes and customer experiences in-store for the future, including next generation internet of things solutions and containerized services managed through the cloud.
Fail to Prepare. Prepare to Fail.
The trend for larger c-stores to expand their physical footprint is set to continue. In the last few months, Shell has returned to downstream retail activity in the United States with new store purchases and additional acquisition activity from EG Group, Parkland, Jacksons and Casey’s, to name but a few. Those that adopt a software defined approach to their store infrastructure will be well prepared to capitalize on the technology synergies within M&A, ensuring they deliver value to the business ahead of schedule.
Nick East is co-founder and CEO of Zynstra, an NCR company based in Bath, U.K.
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