Selling a Family-Owned Heating Oil Company
Exploring the decision to sell your family-owned heating oil company is by no means easy. As heating oil M&A advisors, it is common to hear about the internal struggle and emotional conversation heating oil business owners have with themselves. Here are some of the reasons why we are seeing heating oil 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: Some heating oil jobbers are seeing declining consumption due to governmental policy changes for cleaner energies.
I am sure that it is no surprise to you that selling a heating oil business is a great opportunity for a perspective buyer. Let’s face it, heating oil is used all over the United States, but approximately 82% of residential users are located in the Northeastern region, according to the U.S. Energy Information Administration. In addition, small businesses and farms use heating oil as an energy source to heat barns, greenhouses, workshops, and as a backup heat source in the event of interruptions to natural gas supplies. As M&A advisors, here are some reasons why your heating oil business makes sense as a great opportunity for a buyer:
- Grow local market share
- Expand into a new market
- Diversify into a new product
As heating oil M&A advisors, we know that there is more than meets the eye when seeking to sell your heating oil business. Let’s talk about some key value drivers when selling a heating oil business:
- Customer Base: Is it residential, commercial, ag, or a mix? Do they have contracts or is it month-to-month?
- Customer retention: The higher the tenure of the customer the greater chance they stick around after the acquisition.
- Gallons delivered: The greatest variability is weather. Does the volume trend match the weather history?
- Fleet and Equipment: How many trucks (ages, miles, service records)? What technology?
- Bulk Plant: Is there one or more?
- Territory: What is the radius served? And route density.
- Safety and Compliance Records: What is the statute of records? And are those records easy to provide?
- Team Member Stability: What is the tenure of your team members?
As M&A advisors, each seller has a unique situation. A family business owner recently 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:
- 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?
We consistently hear the business owner say, “I haven’t sold a company before, so I don’t know where to start.” As heating oil M&A advisors, we are here to guide and teach you throughout the process. We understand that the process can become overwhelming when you need to consider “what is a fair offer?”, add a short time-frame, mix in 4 other companies competing to win, AND your need to continue running your business as if you were not selling it.
As heating oil M&A advisors, 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 heating 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 on buyers you approve
- Receive and analyze 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 protecting your customers and employees
- Navigate an acceptable Purchase Agreement
- Close
If you are not looking to sell your heating oil business right now, that’s okay. You now have uncovered an advantage, the opportunity to prepare! As M&A advisors, we would suggest starting with a Meridian business valuation. Not only will you obtain an accurate valuation, financial ratio trends, and industry benchmarking, but you will also get suggestions on how to grow your company valuation.
