“Rob and his team were instrumental in the coordination of the sale of our chain of the gas stations and c-stores. We worked together as a team with the Corrigan Oil team, and the transaction was a great success!” Jerry L.
Timing to take the company to market with a long-term fuel supply contract in place.
The question is, when is the right time to take this chain of gas stations/convenience stores to market with a long-term fuel supply agreement?
Equity’s client owned a chain of gas stations and convenience stores strategically located in the thumb of Michigan. Our client was in a long-term fuel supply agreement with their jobber. Termination of the fuel supply agreement was too costly to terminate the arrangement and pursue a sale to another chain of stores. During our process of positioning the company for sale, the company was fielding multiple unsolicited offers to purchase. But the owner wasn’t sure he was ready to sell because of the supply agreement.
The Equity approach:
1. Provide a valuation of the company and a marketing plan as to when to take the company to market:
Equity provided an initial informal assessment that included potential deal structures, a review of all the real estate and assets, and upgrades that needed to be completed to provide maximum value drivers. By way of achieving this initial step, the owners of the chain of fuel stores and convenience stores were in a better position to maximize the value of what the company assets and real estate could bring on the open market.
2. Recommend value drivers to increase the marketability of the chain:
The Equity team identified several value drivers to increase the marketability of the company—such as increasing gallon thru put at each location, add a beer and wine at one site to increase sales, update point of sale systems, and upgrade the card readers at the pumps, to be compliant with future requirements forthcoming. As well as improving some of the facilities with new paint and other aesthetic needs. By way of completing these tasks, the chain was position to maximize value drivers to increase the value of the chain and increase the sales price of the chain.
3. Sale of one location within the chain:
Equity and their client determined it was best to combine two locations within the community to create a single stable site within the community served. As well as selling a place to the competitor across the street, it provided the competitor a newer updated location, rather than the competitor building a new site. As well, selling the station that was the least performing location within the chain, and was a value drain on the overall chain, increased the value of the remaining stores in the chain, and increased the total EBITDA and profit of the company. Also, our client was a company that was in business for many years, and some buyer’s questions if our client was really a seller, by way of selling the location referenced herein, it sent a clear message the chain was for sale!
4. Equity determined that the best time to market the company was 18 months before the end of the fuel supply agreement (a five-year agreement)
Two years later and after many value-based improvements, on our recommendation, Equity took the company to market, and receive multiple offers from qualified buyers, and;
Equity negotiates a transaction that both the buyer and seller were pleased with:
The initial round of LOI’s exceeded our client’s expectations; however, our client was not focused on the highest bid, but, was focused on working with the company that would take the best care of the employees and continues to serve the communities that they served over the past several years. Our client Chippi Enterprises Inc. choose to accept an offer from a Corrigan Oil Company and could not be more pleased with the process and the results of the transaction. Corrigan was first class to work with.
Our team and our client became terrific friends, and both our client and the buyer have become great referral sources for Equity. Referrals are the highest compliment anyone could give our team!
Terms and Conditions of this transactions were not disclosed.