How to Successfully Compete in the M&A Market

There is no doubt about it: The mergers and acquisitions (M&A) propane market is highly challenging to compete in, regardless of the present-day global economic and political environments. After all, there are dozens upon dozens of aspects to consider as you prepare to review your portfolio and assets.

To compete successfully — and consistently, time after time — consider the following best practices. Not only will they help you determine which propane companies are the proper acquisition candidates, but they’ll also increase your likelihood of having a more competitive advantage in the M&A market.

First, you must understand why the owner is selling it. Is retirement approaching? Are they moving onto completely new and different opportunities? Or has their company grown so much, they can no longer manage it how they would like?

Additionally, if you’d like to acquire a propane company, can you successfully integrate its operations into your company’s existing structure? And, if so, are there any synergies you should consider that would add considerable value to the acquisition?

As you prepare for a potential merger or acquisition, you should consider three additional aspects: the selling company’s resources, organizational structure and growth potential.

Key Resources

What key resources does the selling company have that make it operate effectively? Does it have a reliable management team, professional office staff or highly experienced drivers, all of whom focus on customer satisfaction? If the selling company has these resources, you (as the new owner) will be able to focus more on margin and expense management or the company’s sales growth potential, as you won’t need to worry about hiring employees.

The propane industry is notorious for having frequent labor shortages. Therefore, if you can acquire or merge with a propane company with adequately trained employees, your acquisition or merger will automatically have value.

Culture, Organization & Finances

Aside from drivers or service technicians with knowledge, proper training and industry certifications, you should consider the seller’s culture, how organized it is and its finances.

What is the company’s culture like? Has it been positive consistently? Is it known for its customer service? Is customer retention high? What about the company’s employees? Have some shown remarkable loyalty by staying for several years or even decades?

How organized does the seller seem? Does the company maintain adequate customer, fleet and safety records?

How are its finances? Is overhead generally low? Is its insurance loss-run history relatively low? Is the fleet well maintained, or do they have large truck repair bills?

Finally, you must learn about one more vital aspect of the potential acquisition or merger: Has the company managed its margins properly? In particular, are the margins current, with regard to present-day market rates and fluctuations? It is critical that most — if not all — of these aspects either meet or exceed your expectations before any M&A agreement can occur.

Location, Location, Location

As companies consider where to operate, an old adage is frequently mentioned: “location, location, location.” By having the proper location (one that suits its unique aspirations, customer base and offerings), a propane company will likely thrive. As you prepare for a potential merger or acquisition, the company’s location must be a primary factor.

Is the propane company located in an area that offers growth potential and stability? Are there any opportunities for new applications, increases in gallon sales and a rise in margins? Are there any considerable market threats that may minimize the likelihood for growth? This could include everything from government restrictions on propane usage, to massive natural gas expansions in nearby areas, to mandates for electrification. Remember, the upside is of the essence. The more upside possibilities there are, the more likely you should consider acquiring or merging with a company. If the synergies available from acquiring a competitor will increase your company’s market share and productivity while bolstering your existing cost-effectiveness and operations, move forward with it — preferably sooner rather than later, as it will make your company more valuable in the long run.

If, for whatever reason, the possible negatives of a merger or acquisition outweigh the potential positives, you may need to rethink the merger or acquisition before anything is finalized.

Experience & Industry Knowledge Are Crucial

There is so much involved with the propane industry, most of which professionals learn about after months or years of employment. However, experience and industry knowledge are crucial to the success of a propane company. You can’t simply hire and train individuals in a matter of days. Instead, they must be highly trained and seasoned, from their participation in the Certified Employee Training Program (CETP), to their Commercial Driver’s License (CDL) with hazardous materials (hazmat) endorsement. Find a propane company that offers highly talented, longstanding employees who are also educated, experienced and fully trained.

Looking Ahead

If you believe you’ve found an excellent fit for a merger or acquisition, there is great news, especially as you prepare for 2025: In recent months, privately run propane companies have shown more and more interest in M&A. Furthermore, they’re acting on it, as quite a bit of M&A activity has occurred lately. As potential opportunities rise in 2025 and beyond, now is the time to acquire or merge with a propane company that’s apt for you. Stay focused on each of the aforementioned best practices as you strive to find the best match possible. By doing so, you’ll likely increase your bottom lines in the short run and the foreseeable future.