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RIVIERA BEACH, Fla. — In order to survive, convenience store retailers must “get big, get great or get out,” according to Joe Petrowski, former CEO of The Cumberland Gulf Group and now managing director of private equity group Mercantor Partners.
Serving as keynote speaker Tuesday during the Convenience Store News 2015 Fuels & Tech Summit, Petrowski did not just come armed with information about the future of fuels. He also discussed the competitive landscape for c-stores, as well as the current mergers & acquisitions (M&A) environment.
“You need to have 1,000 stores to really compete,” he said. “You can have less, but you need 1,000 for economy of scale.”
He further explained that having 1,000 sites at a minimum is important to support a retailer’s information technology, human resources, procurement and finance departments.
Petrowski added that c-store retailers should aim to sell 2 million gallons per site per year as a benchmark. Meanwhile, on an in-store basis, each location should generate a minimum of $340,000 in annual cash flow.
THE 2016 M&A MARKET
Whether big or small, c-store retailers can expect to continue being contacted regarding being acquired, Petrowski predicted. Even as stocks of master limited partnerships continue to decline, he expects M&A activity to stay hot in 2016.
One group in particular that will keep calling c-store retailers about potential M&A activity is private equity groups, which have $1.6 trillion under management, stated the Mercantor Partners director.
When seeking acquisitions, private equity groups look for the following attributes:
- Ability to grow organically;
- Strong management team; and
- 20 percent return on equity
Conversely, any c-store retailer looking to sell their business should seek the following in an acquirer, concluded Petrowski:
- A fair price;
- Someone who understands the business;
- Has a significant capital base;
- Has in-house expertise and management team; and
- Has existing activity in the space.
The Convenience Store News 2015 Fuels & Tech Summit took place Dec. 7-8 at the Palm Beach Marriott Singer Island Beach Resort & Spa in Riviera Beach. The event was sponsored by Growth Energy, ZipLine and Warren Rogers.