Industry consolidation – this was one definite theme (in the form of a loud murmur) at the 2023 NAMA Show, as the big national operators continue to buy out local independent operators. New York, Texas and Arizona – three major deals have gone down recently, and undoubtedly, there are more on the way. How should you react as an operator when a large national company goes on a buying spree in your market area?
Is there cause for concern?
Is consolidation in your regional area a cause for concern? More than one operator asked me that question on the convention floor at the NAMA Show in Atlanta. I reminded them of the reaction from some of my competitors one year after I sold my business in 2017. “It’s the best thing that ever happened,” said one operator. “Your company was brutal to compete against.”
Bottom-line: While they have many strengths, the big national operators aren’t a good fit for every account, especially the ones that prefer to deal with a locally owned operator who can deliver a more personal level of service. As a result, after a sale to a large national company, a certain percentage of the accounts that were purchased become extremely vulnerable, creating a nice opportunity for local competitors.
Opportunity on many levels
Additionally, large companies are often challenged when it comes to making a smooth transition following a takeover. Their interest in implementing their own software programs can result in invoicing mayhem, a definite irritant for clients. Changes in company policy can create employee morale issues, which can open the door to recruiting new team members. All these issues are amplified when the former ownership is shown the door immediately after a deal closes, a common practice and sometimes, a critical error. One good thing – any company that makes a big acquisition will be so busy trying to assimilate the newly acquired company into their operation, they will have little time to disrupt or pursue your accounts.
M&A is heating up
From all indications, this recent M&A activity is just the beginning. Mike Kelner of VBB Advisors, a leading industry broker and a sell-side business intermediary, said that acquisition activity is hotter than ever. “The multiples that are being paid for quality business is at an unprecedented level,” he said. “From every indication, there will be several more significant deals made in 2023 and some of those deals will change the competitive landscape in certain markets.”
Have a strategy
If the landscape has suddenly changed in your market area, there are certain steps you can take to strengthen your company’s position. There are several proven strategies for dealing with competition, and when applied, could help your company land some vulnerable accounts following a local acquisition by a giant competitor.
1. Know your clients
This is always important but particularly when the local landscape has changed. Focus on strengthening relationships, which will generally circumvent lowball pricing, which may now become more prevalent in your area.
2. Know your prospects
When you were competing against another strong local competitor like your own company, it was the strong relationship that made it impossible to get them to switch. This might be a great time to have a conversation with the decision-maker, your previously reluctant prospect, to remind them that they are now dealing with a national company instead of a local operation like yours.
3. Beef up strategic partnerships
There is no better way to get a barometer on the local marketplace than to talk to some of your strategic partners, like the friendly vending partner who is now sharing a location with a national OCS operator who also does vending. Because the vendor my feel a little threatened, they will be happy to help you take over the OCS side of the business, especially if you have a cooperative relationship with them.
How about the first aid supplier, or the dedicated cold brew supplier, who will help open the door to an account for you, with the knowledge that you will do your OCS thing and leave them alone. They know they are now vulnerable if the newcomer, the national operator, stays in place and decides they would like to offer the client some vendor consolidation benefits.
4. Get innovative
Take a hint from your national competitor who does not hesitate to roll out new products and equipment. They are very good at bringing the most exciting new concepts to market. Your company needs to find out what they are up to and get on the same page.
Check out Automatic Merchandiser’s Vending & OCS Nation podcast, “Three business development strategies that are built for 2023.” In that podcast, I talk about using hot, innovative products to land new business – highly relevant when taking on a national competitor.
A positive development
As Kelner notes, operators should look at all this M&A activity as a positive development. “Considering what operators have gone through during the pandemic, plus the slow repopulation of the office, the fact that there are big national players out there hungry to acquire strong local operators is a cause for celebration,” he said. “When it is time to sell your company, at least there are qualified buyers. It’s a healthy sign for our industry.”
ABOUT THE AUTHOR
Bob Tullio is a content specialist, speaker, sales trainer, consultant and contributing editor of Automatic Merchandiser/VendingMarketWatch.com. He advises entrepreneurs on how to build a successful business from the ground up and specializes in helping suppliers connect with operators in the convenience services industry – coffee service, vending, micro markets and pantry service specifically.
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