Rosset Report: Third-quarter M&A update

Nov. 2, 2022
Companies are still facing economic headwinds. Mergers & acquisitions might slow for 2023.

In this column, I offer my prediction on the state of mergers and acquisitions for the year ahead – based on my conversations with a small micro market only operator, a mid-size vending and office coffee service operator, as well as all-services operators ranging from mid-sized to the national companies.

Headwinds have not slowed down

For all of 2022, operators that I speak with have faced increasing costs of goods and fuel, limited product deliveries from suppliers and the same difficulty in finding competent new hires.  The U.S. Federal Reserve, which controls the money supply and interest rates, has consistently raised rates this year to slow inflation. So far, it’s having little effect, and most economists feel they are driving us into recession, although I feel we might already be in one.

A slowing economy is obviously never good for business. Unemployment rates will rise, and cost of borrowing will have an impact on companies trying to expand their footprint.

Right now, most operators tell me that business is good, and in most cases, revenues are up. On the downside, they continually need to raise product prices and employ more and more technology to keep up with the competition.

Some feel that in a recession, because of layoffs, there may be more people available for hire. I think this is a temporary fix. The attitude and wish list of the available workforce still is trending toward the skilled services and high-tech industries. Fewer young people want to do the physical labor necessary for a job in this industry. This is nothing new. In a column I wrote 10 years ago, I suggested this same trend would be an ongoing situation. I see nothing that will change that now.

How the large buyers are holding up

At this point in time, I don’t see where the traditional buyers of operations are changing their outlook. I’m still getting premium prices from all, although they are being more selective on what they want to own.

If you are not mostly cashless, don’t have telemetry, and don’t offer markets, you not only risk a much lower offer but also risk the ability to sell to the majors. They all use telemetry/cashless equipment so the cost of converting your non-tech machines can become prohibitive.

If you do need to upgrade to get a premium price, you need to determine if it is worth the time and expense to do so. Technology isn’t cheap, and we would have to decide on a case-by-case basis if you need to do it.

If you are not planning an exit in the next five years, I would implore you, as I have since about 2005, to upgrade now. Competition is tough, so if you don’t grow, you should probably explore an exit strategy.

Outlook for M&A in 2023

Earlier in the year, it seemed as if all systems were go, but today, I do not think M&A activity will be heightened in 2023.

While the good purchasers will still want to buy quality competition, just how many opportunities still exist in the market?

Some Canteen franchises may sell to Canteen corporate or other franchises. If you are not associated with Canteen, you may not ever have a chance at these companies.

Also, a large number of the best independents are members of US Connect or other groups. Although I have sold some large US Connect companies, having that third-party relationship makes these sales more difficult, and they have to be handled differently than a normal acquisition.

When an older, established company sells out, there are few, if any, newcomers starting up. This is a tough, competitive industry, and it’s hard to break in, especially now with a questionable economy.

So, as the number of available (for sale) mid-sized, well-equipped and technology-smart operators declines in the industry, it portends that acquisitions of these types of companies will also decline.

In summation, I predict less opportunities for the typical buyer, meaning less M&A activity in the foreseeable future.


Marc Rosset is founder and president of Professional Vending Consultants Inc., a specialized intermediary for acquisitions of full-line vending, food service and office coffee service companies in the U.S. PVC has represented more than 310 transactions with gross sales value of just over $900 million since 1993. Rosset has played a key role in helping to establish industry-recognized guidelines for the value of operations in the industry. He can be reached at [email protected] or (312) 654-8910. 


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