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Sunday, March 1, 2015

The Sell: How to Marry a Billionaire
The climate to sell is heating up, but expect some heartbreaks

Source: CSP Magazine
By Angel Abcede, Senior Editor/Content Development Coordinator

Liquidity: the gold at the end of a long and rewarding life of hard work, saving and investment.

For many retailers, their convenience stores are their life’s bet, not a buy-yourself-a-job business but a value-generating lockbox that they hope will reap a greater payday than treasury bills or CDs.

It’s an investment that’s also meaningful in other ways: the livelihood for dedicated employees, a necessary public service or a bedrock for charitable work.

“A lot of [c-store chains] are established, multi-generational pillars of the community and important family enterprises, as opposed to the Wall Street ‘startup with an exit’ approach,” says Todd Anderson, principal with 1CapitalPartner, Orange County, Calif. “That’s one of the things I like about this business: A lot of times they’re companies that take their position in the community and their businesses seriously.”

And it would be an overreach to suggest that a family-run chain is going to evaporate under competitive pressures and lavish opportunities to exit. That said, at the core of every living enterprise is the generation of wealth. And when disparate forces align to push c-store multiples to historic highs, it may be time for many to sell.

Some of the main pressures supporting a seller’s market include:

Low Interest Rates: The need to pull out of a dramatic recession has led the Fed to suppress interest rates and keep them low for several years.

MLPs and Higher Multiples: The tax advantages brought on by the relatively new MLPs have pushed multiples into double digits, even though they’ve historically hovered in the range of 5x to 6x.

High Gas Margins: The precipitous drop in oil prices has buoyed many retailers with higher-than-average fuel margins, improving store revenues and the value of wholesale contracts.

Other Buyers and Defensive Buying: The industry’s traditional consolidators, namely 7-Eleven and Circle K, continue to participate in the bidding process despite MLPs throwing their weight around. Most notably, Laval, Quebec-based Alimentation Couche-Tard and its Circle K chain bought Cary, N.C.-based The Pantry in a $1.7 billion transaction announced late last year. But some purchases may be less about growing a strong network and more about locking others out.

Given these unprecedented developments, Gregg Budoi, the former CEO of EZ Energy, a 67-store chain plus dealer network that sold to Dallas-ba