To succeed in this industry, companies must prioritize value drivers that can help them remain competitive and profitable.  Here are the top ten value drivers for propane and petroleum companies.

Top 10 Value Drivers

1. Profitability: Ensure your company has 3-5 years of consistent profits & healthy gross profits/gallon
2. High company propane tank ownership: This signals that your business has table and loyal customers
3. Annual Gallons: This shows steady increase in annual gallons sold
4. Quality customer base: It’s not enough to have customers, you need high-margin residential customers, auto delivery, committed commercial and wholesale customers, and branded distributors
5. Adequate bulk storage capacity: This mitigates supply disruptions and allocations
6. Quality assets: You’ll need well-maintained trucks and freshly painted tanks & facilities
7. Safety: This is standard and must have -compliance with all regulatory requirements & training
8. Great customer service: You want to show excellent stories, testimonials, something to be proud of
9. Exceptional employees: This shows acquirers you have a trusted, experienced, well-trained, loyal, professional team
10. Good records & systems: Use modern accounting & software systems, show proof of propane tank ownership, solid environmental controls, efficient dispatch and billing procedures

Will the value of my business be more or less in a few years from today?

If you’re thinking of an exit strategy, you probably have a couple of questions regarding the real value of your business. On a more macro level, the following factors help drive business values up or down. Below you’ll find a guide that can help you have a better standing to be valued higher.

If you have questions about exit strategy or valuation for your company, our Oil & Gas team can help. Feel free to contact:

Gary Papay
Managing Partner and Principal

Gary Papay is a Principal at Eaton Square. A professional intermediary and business appraiser specializing in the sale and transfer of privately held mid-market, heating oil, propane, and petroleum companies since 1976. Gary is the partner in charge of IBG’s Pennsylvania and North Carolina offices.

gary.papay@eatonsq.com
Ph: +1 (570) 584-6488

The most recent transactions in the Oil & Gas sector include:

• Sail Energy acquires Tavern Energy
• Blossman Gas, Inc. acquires Buchanan Oil and LP Gas, Inc.
• Energy Distribution Partners acquires Mount Perry Propane
• Sail Energy, LLC acquires Klobe Fuel Company, Inc.
• Thompson Gas acquires Gilbert Propane, Inc.
• Lakes Gas acquires Van’s Gas Service
• Button Oil & Propane acquires Phillips Fuel
• Ferrell Gas acquires Dubben Gas Service
• Ferrell Gas acquires Rez Bear Propane
• Phoenix Park Energy Marketing, LLC acquires Propane Terminal from Interstate Fuel & Energy, LLC
• Florida Public Utilities acquires Hernando Gas
• Thompson Gas acquires Reliance Propane Service
• Energy Distribution Partners acquires High-Grade Gas Service
• Westmor Industries acquires Metzler Bros. Tank, Truck & Trailer

What’s driving M&A activity in the Oil & Gas space?

1) Growing demand for alternative fuels

One reason for the recent surge in M&A activity in this industry is the changing landscape of energy consumption in the US. While demand for traditional fossil fuels like gasoline and diesel remains strong, there is also growing demand for alternative fuels like propane and renewable energy sources. As a result, petroleum and propane distributors that have diversified their offerings are becoming more valuable to potential acquirers.

2) Need for scale

Another factor driving M&A activity in this industry is the need for scale. Many smaller petroleum and propane distributors are finding it increasingly difficult to compete with larger players that have greater resources and economies of scale. By merging with or acquiring other companies, these smaller distributors can gain access to new markets, expand their customer base, and achieve greater efficiencies in operations.

3) PE firms looking for stable, cash-generating companies

In addition, M&A activity in the petroleum and propane distribution industry is being fueled by private equity firms that are looking for stable, cash-generating businesses to invest in. These firms are seeking out companies that can provide a steady stream of income over the long term, and petroleum and propane distributors fit the bill.

What does this mean for the Oil & Gas industry?

For one thing, we can expect to see continued consolidation as smaller players are acquired by larger companies or merged with other small players to achieve greater scale. This could lead to a smaller number of larger players dominating the market, which could be both positive and negative for customers.

On the positive side, larger companies may be better able to negotiate favorable prices and terms with suppliers, which could lead to lower prices for customers. They may also be able to invest in new technologies and infrastructure that smaller companies can’t afford, leading to greater innovation and efficiency.

On the negative side, fewer players in the market could lead to less competition, which could result in higher prices for customers. It could also make it more difficult for new companies to enter the market, which could stifle innovation and limit customer choice.

Overall, the recent surge in M&A activity in the petroleum and propane distribution industry is a sign of a changing energy landscape in the US. While traditional fossil fuels will likely remain an important part of the mix for years to come, the rise of alternative fuels and renewable energy sources is creating new opportunities and challenges for the industry. As companies seek to adapt to these changes and position themselves for long-term success, we can expect to see more M&A activity in the years ahead.

If you have questions about exit strategy or valuation for your company, our Oil & Gas team can help. Feel free to contact:

Gary Papay
Managing Partner and Principal

Gary Papay is a Principal at Eaton Square. A professional intermediary and business appraiser specializing in the sale and transfer of privately held mid-market, heating oil, propane, and petroleum companies since 1976. Gary is the partner in charge of IBG’s Pennsylvania and North Carolina offices.

gary.papay@eatonsq.com
Ph: +1 (570) 584-6488

We’re sensing a resurgence in the Oil & Gas sector at the moment. What are you seeing in the US market?

After last year’s downturn, we’re seeing a pickup this year. Obviously, the price of product is driving that but the economy is bouncing back in the US and around the world. I think you’re going to see a real uptick in demand around the world.

This translates into the sector as well, particularly in the downstream segment of the Oil & Gas sector. The propane distributors, heating oil distributors, other petroleum distributors, lubricants. We’ve seen a lot of activity in that space right now, but not in the upstream. Those guys got hurt pretty bad in the downturn. So it will take awhile before they come back.

That sector is quite dominated by family-owned businesses. What’s your advice to the owners in that sector at the moment?

A lot of the owners in that segment are baby boomers, like many other industries. And it’s important for them to put together an exit plan and to work with an M&A advisor to figure out where they’re going with their business. In time, they’ve got to exit, so planning ahead now is important. With the upturn again, things should be looking a lot better for them from a profitability standpoint. It’s time to really take a hard look and get an idea of where you want to go and how.

How are you seeing the prices that the buyers are willing to pay for companies in those sectors at the moment?

Some are very strong like the propane industry and lubricants, which are very active. The heating oil space is a mature industry, so it’s not as aggressive. Although there are some good regional and local players in that industry as well.

For people who are contemplating selling their business at the moment, what’s the best advice you can give them?

Work with an experienced M&A advisor or somebody who has some experience in the space and let them help you build the business. Set a game plan to exit and as we always say exit at the right time for the maximum value.

If you are in the Oil & Gas sector and have questions about your strategy, you can contact us anytime. Learn more about our Oil & Gas team.

Gary Papay
Principal

Gary Papay is a Principal at Eaton Square. A professional intermediary and business appraiser specializing in the sale and transfer of privately held mid-market, heating oil, propane, and petroleum companies since 1976. Gary is the partner in charge of IBG’s Pennsylvania and North Carolina offices.

gary.papay@eatonsq.com
Ph: +1 (570) 584-6488