Selling a Family Owned Propane Company
Exploring the decision to sell your family-owned propane company is by no means easy. As propane M&A advisors, it is common to hear about the internal struggle and emotional conversation propane business owners have with themselves.
As propane M&A advisors, here are some of the reasons why we are seeing propane business owners selling:
- No Succession: You have determined that the next generation is not prepared to take over the business, they do not want to, or there is not another generation.
- Market Volatility: After decades of seeing the volatility with supplier pricing and interest rate fluctuations you have determined it is time to start the next chapter.
- Regulatory & Environmental Pressures: While propane is a cleaner energy source, there are still roadblocks that need to be tackled, which might require massive capital investment, and you want to let the next owner invest.
I am sure that it is no surprise to you that selling a propane business is a great opportunity for a perspective buyer. Let’s face it, propane is used all over the United States from farmers using propane heat to dry their harvests, to propane-powered forklifts, propane powered school buses, or even using it to cook at home.
As M&A advisors, here are some reasons why your propane business makes sense as a great opportunity for a buyer:
- Grow local market share
- Expand into a new market
- Diversify into a new product
We know that there is more than meets the eye when seeking to sell your propane business.
Let’s talk about some key value drivers when selling a propane business:
- Customer Base: Is your customer base residential, commercial, ag, or a mix? Are your customers on contracts or month-to-month?
- Tank Control: Does your business or the customer own the propane tanks?
- Fleet and Equipment: How many trucks do you have (along with age, miles, service records)? What technology has your company implemented (I.E. tank monitors)?
- Territory: What is the radius that you service?
- Safety and Compliance Records: How does the business effectively organize it safety and compliance records?
- Team Member Stability: What is the tenure of your team members?
As propane M&A advisors, each seller has a unique situation. After one transaction, a business owner told me, “There is a lot of value in having an advisor, there are just so many pitfalls.”
Here are some of the challenges we see when selling a propane business:
- Buyers using “financial creativity” to beat you down on price
- Seasonality: Determining the trends throughout the years
- Customer Relationships: If there are no contracts, will customers stay or leave?
- Customer Concentration: What percentage do your top 10 customers make up for your gross profit?
- Company Culture: Will your employees stay or leave?
In every sale we hear the business owner say, “I haven’t sold a company before, so I don’t know where to start.”
As propane M&A advisors, we are here to guide and teach you throughout the process. We understand that it can become overwhelming when you consider “what is a fair offer?”, add a short timeframe, mix in 4 other companies competing to win, AND you needing to continue running your business as if you were not selling it…
That’s why we have developed a simple, yet very effective advisory process. There is a lot of work that takes place between each of these steps, but rest assured you are included in every step of the process because you are in the driver’s seat.
Let’s discuss each step in more detail on a phone call but below is a standard chain of events:
- Complete a propane business valuation
- Build a custom Confidential Information Memorandum (CIM) through collection of financial information and interviewing the business owner(s)
- Research and vet REAL buyers and get Non-Disclosure Agreements (NDA) executed
- Receive Letters of Intent (LOI), this is a non-binding offer to purchase
- Discuss options with you and negotiate your expectations to make a final decision
- Support Due Diligence
- Navigate Purchase Agreement
- Close the deal
If you are not looking to sell your propane business right now, that’s okay. You now have uncovered an advantage, the opportunity to prepare!
We would suggest starting with a Meridian business valuation. Not only will you obtain an accurate valuation, financial ratio trends, and industry benchmarking, you will also get suggestions on how to grow your company value.
