Industry’s Acquisition Report: An Expert’s View

Jan. 31, 2019

Wherever you look now-a-days, there are financial, government and business articles that talk about the new normal. A condition where the old ways of operating have changed and are no longer valid in today’s world. Our industries’ have not escaped that new moniker.

Micro markets, telemetry, new software choices, non-food product dispensing machines, cashless and mobile payments and so much more. There is little to compare to just even eight years ago.

My company has been involved in the merger and acquisition of competitors in this industry for a long time and I have to say, the landscape for acquisitions in our industry also looks nothing like it did when I founded Professional Vending Consultants over 25 years ago.

What were today's acquirers doing years ago?

The most notable buyers today were either not around then or just dabbled in the purchase of a competitor. The typical buyer was a local independent or a Canteen franchise operator who was willing to expand their business and territory by purchasing others who were looking to retire, had health issues or just couldn’t keep up financially.

Years ago, many of today’s current buyers were not pursuing as they are today. Current interested buyers like Accent Foods, was just a local operator around Austin at that time, Canteen Corporate was more interested in franchising then purchasing, AVI was buying but most deals were smaller local fold-ins, First Class was only a small local operator in Los Angeles, CA, and American Food and Vending was geared more towards internal growth then by acquisitions. Other aggressive purchasers are some of the largest Canteen franchises but inmost part they are limited to companies in their protected territories. There are a few that are expanding by purchasing other franchisees. This was also not common years ago.

There were also large acquirers who no longer exist like All Seasons, Custom Foods and the original Five Star operation in Georgia. (Not to be confused with the current Five Star in Chattanooga, TN). Even Aramark was beginning to scale down vending operations and selling divisions across the country in order to concentrate on OCS and the facility management business. In other words, today, most active buyers were not doing much in the way of consolidation years ago.

Why most independents aren't acquiring much today

There are a few handfuls of larger single metropolitan or state independents that would like to acquire but in most cases their companies are also on the National’s radar to be acquired. In addition, they are finding that there isn’t much in the way of potential targets left.

I recently spoke with a $20+ million independent in the Midwest who told me Canteen had virtually bought everyone in his area that he would have liked to acquire. This scenario is played out in numerous places around the county.

Even when there are some decent independents left to purchase, in virtually every case, our larger independents can’t offer the premiums and terms that their larger competitors not only can, but ARE offering. In many transactions, we are obtaining purchase offers at 50 to 100 percent higher than we were getting just 10 years ago.

Of course, every deal and circumstance are different, and numerous demographics determine the offering price such as; fold-in capability, purchasing the last remaining competitor in the area, type of business being sold, etc. For example, a company equipped with full telemetry, a substantial number of micro markets and a good OCS program can expect to be offered a much higher price then one that is just doing vending.

As our economy did an about face starting in the 90s and has continued to contract (for vending operators) even in the current economy, more independents had been and are being squeezed by corporate downsizing, major manufactures moving operations overseas, obesity issues changing the way school systems around the county disallowed traditional vending, new difficult government rules and regs, current trade and deficit issues affecting corporations and one of the biggest issues of all: finding qualified employees who were willing to work the long hard hours it took to service and maintain routes.

If you ask most operators today, they will tell you how hard it is to find good new hires or even find those who can pass drug and driving investigations, along with criminal and financial background checks. There are owners who tell me they keep permanent ads on numerous jobs posting sites and even if they are momentarily fully employed, they know this situation won’t last and they will need more and more candidates for the near future.

So many have left the industry

There is no one source which can calculate the number of operators who have sold in the past 25 years. Most of these deals are not reported in any public forum. Even some of my purchasers don’t allow a news release to be published anymore. PVC, Inc. has been involved in the sale of over 300 separate vending, OCS and food service operations, accounting for over $1 Billion in operating revenue. But even this is just the tip of the iceberg.

Some of my criteria for a listing was the operator had to have at least half a million in revenue, had to be using major manufacturer’s equipment such as AP, National, Dixie Narco, etc., and needed to be in an area where there was a likely competitor to purchase the business. Of course, as the new normal has changed, currently we also have to look for operations who have telemetry, micro markets, OCS and good reporting systems. Today’s buyers are generally only interested in these types of operations. Older fashioned operators doing vending without tech, only partial cashless equipment and no markets or OCS are going to find much lower offers. Or no offer at all.

In the past few years we had to pass on listing a number of these companies because in their particular markets, the right cash buyer at a fair offer price would be too impossible to find. That’s how much this industry has changed.

Some markets, including large ones, have few good opportunities left

As consolidation has heated up in the past few years there are some medium to large markets and even some states where there are only a handful, if any, quality operators left to sell.

You can find only a few quality independents left in states such as South Carolina, Florida (yes! Florida!), Iowa, Nebraska, Arkansas, Tennessee, Mississippi, Alabama and New Mexico just to name a few. Even some larger cities such as Des Moines, Omaha, Kansas City, Miami, Memphis, Milwaukee, Portland, Houston and others have seen potentially great acquisition candidates continue to dwindle.

Is there a silver lining here? 

There is, at least for those good operations who employ the technologies and services I’ve already outlined that are needed by the purchasers. Especially if you are located in one of these areas where you may be the last or at least one of the few remaining independent operations, your value is on the rise.

In the past two years I have received record breaking offers for OCS, Micro market business and even vending where telemetry and other modern system are applied. How do I know they are record breaking? Most of my sellers were not even expecting the prices they were offered. And my personal knowledge of hundreds of deals (even those I’ve not listed) assures me that many of these offers are unprecedented compared to just a few years ago. Supply and demand ARE everything. The better your operation in an area of few competitors makes your company much more desirable.

I have also seen an increased demand for non-tradition vending and OCS operations. There are some quality buyers who are looking for good local and regional coffee roasters, distributors and OCS providers to convenience/mini mart locations, and full-scale foodservice and catering companies.

You will notice I’ve mainly been speaking about the large buyer in the vending arena. There are also a number of large exclusively OCS, roasting and foodservice only acquirers out there. We will speak about these opportunities in another article later this year. 

About the Author

Marc Rosset is founder and president of Professional Vending Consultants, Inc. from Chicago, Ill. and represented more than 300 transactions with gross sales value of over $770 million since 1995. Contact Marc at 312-654-8910 or e-mailed at [email protected].

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