NORFOLK, Va. -- With rising multiples, bidding wars for prized assets and yet another M&A announcement in recent weeks with GPM buying the remaining 163 sites in Sun Capital's c-store portfolio, the pressure to sell has been on the minds of many convenience-store retailers.
But not all are inclined to do so. Editors at CSP magazine have examined the current mergers-and-acquisitions frenzy--almost unprecedented in recent years--and took an in-depth look into what's driving the activity and what retailers can expect in the near term.
Editors also found several retailers adamant about keeping their chips in the game, determined not to succumb to the temptation to sell.
Jeff Miller, owner of the 29-store Miller's Neighborhood Markets chain based in Norfolk, Va., is one of those stalwarts. He recently shared his views with CSP Daily News.
Q: With both the master limited partnerships (MLPs) and traditional consolidators driving multiples up, what keeps any retailer from deciding to sell?
There are lot of parts to it. In our particular case, we're a family business, and it's not always all about the money. Well, of course every business is about money, but in our particular case, we aren't done yet. We've got things we want to do. I'm running a c-store business. I'm not ready to retire and do not want to work for someone else at this point. Now, that's not the same for everyone.
Q: What's your assessment of the current M&A market, and is it good or bad for the industry as a whole?
A: We've seen this before, not the numbers, which were in the 5x-6x multiple range. But we've cycled through this a couple of times since I've been in business. You get consolidators and the rollup guys driving multiples, and it's a great opportunity for some to cash out. But sooner or later, someone has to run these businesses and that's the challenge. You've got 1,000 stores. Now what? That's the more sobering part. Acquisitions are fun--that's the exciting part. There's tremendous growth, but at the end of the day, you've got to create sales, run good operations, get good people working for you. That takes a lot of hard work.
Q: So is there trouble on the horizon?
A: In the past, [financial or economic issues] have gone down which sank many rollups, or they weren't able to match their operations with their growth. The big question is assimilation. It really is. We did a lot of acquisitions early on in the 1980s and 90s, and every one was different. No matter the template or skeletons in the closet. It takes a lot of hard work, especially if the cultures are different.
Q: What about the deals that seem to hopscotch across the country, where geographic areas seem really spread out?
A: We have stores in Virginia and in Florida. It's not that hard to do. All of the fuel is centrally procured. All of the accounting is handled here in Norfolk. The cash registers are plugged into T-1 lines and DSL to the backoffice accounting, so distance doesn't matter. The thing about the c-store business that makes it unique is we have to go out and see the stores. We have to be in the field. If you don't go regularly, they have a tendency to degrade. You have your people, your rules and your inspections. You've got to get out there and see them. That's where the distance can make things difficult.
Q: In what other ways does this current M&A frenzy affect you?
A: It does make it more difficult for little guys to grow. You hear about the size of the acquisitions in this latest round, but size hasn't mattered. The big guys are gobbling up guys with five, six, seven stores. For smaller guys like me who want to grow--who are interested in five, 10 12 stores, which is more in our wheelhouse from a size standpoint--we're going up against Wall Street money. That's difficult to do. It makes it that much harder.
For more analysis of the current M&A market, watch for the March issue of CSPmagazine.
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