Mergers and acquisitions (M&A) activity in the petroleum and propane distribution industry has been on the rise in recent years, and it’s showing no signs of slowing down. With a growing demand for energy sources in the United States, petroleum and propane distributors are becoming increasingly valuable, making them attractive targets for M&A activity.
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 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.
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