Every year, dozens of independent propane companies are acquired by larger companies. These deals can be good for our industry — consolidation makes the acquiring company more efficient and profitable by providing economies of scale. More importantly, a seller can convert his or her life’s work — and in many cases generations of a family’s hard work — into funding for a well-earned retirement and/or generational wealth transfer.
But what about the customers and the communities these companies serve? This is one of the biggest challenges an acquiring company faces: How can we ensure that local relationships and service values continue after we buy a smaller independent?
These are important questions for several reasons. First, the buyer often values a business based on the income stream it produces and may lose some of that income if customers feel less valued by a larger company. And sellers usually prefer to sell to companies that will treat their customers, employees and communities well.
The propane industry’s history of local and personal service is one of our great strengths. After all, how many of us feel any loyalty to our cable company or internet service provider? Generally, we don’t, because we have no personal relationship with anyone at those companies who can help us solve our problems. They have outsourced us to chatbots and distant call centers; why would we feel any loyalty to them if another provider or alternative solution is available?
On the other hand, propane customers have the choice that cable and internet customers do not. If the personal, local experience is important to them, there are usually propane companies that maintain a local presence in their area. Our company receives reviews weekly that mention our customer service reps, service techs or drivers by name. That doesn’t happen much in industries where companies commoditize their customers.
How can we strive for a “win-win-win,” where the customers receive the level of service they want (and possibly some extra features with an acquiring company), sellers are assured their long-time customers and community are treated well, and the buyer receives the benefit of the business it valued based on the income stream?
Be Fair to the Sellers
The sellers, if treated well, will be your best ambassadors to the community and your new customers. Even though every sale is a negotiation, do not use your economic advantage or transactional experience to their disadvantage. This may be one of a series of transactions for you; for them, it is a once-in-a-lifetime event and may be the culmination of several generations of lives’ work. Make sure they get a fair deal and have a positive experience.
I have seen disputes over a handful of tanks leave a sour taste on an otherwise successful transaction. Those kinds of disagreements can result in damage to the reputation of a business far outweighing the value of a few 500-gallon tanks. Rest assured, if the community feels like one of its own has been mistreated, they will take it out on your business.
Treat Employees Well
Your new employees are your next-best ambassadors to the community. Have a clear plan to communicate with them at the earliest possible opportunity. Make sure they know as much as possible about what their future looks like and their role with the new company. Point out any tangible or intangible benefits they may receive, like better benefits, more career opportunities, better equipment, etc.
New employees are bound to have questions after the shock of an announced acquisition wears off. Anticipate questions about employee benefits, approval processes and reporting relationships, which frequently come up. Provide them with a list of contacts who can help with the questions they may have.
That said, don’t overwhelm them with too much information or paperwork too soon; if they are emotionally invested in their job, this is nearly as stressful for them as it is for the sellers.
Communicate With Customers
Be ready to communicate quickly and effectively with your new customers. Some acquisitions can be completed without any visibility to the customer, and communication may not be warranted.
We have a lot of residential business in small communities in the Midwest, and as a native of a small town myself, I know that “news” travels fast. I prefer to communicate as quickly as possible with our new customers. They have been loyal to our sellers for a reason, and I want to assure them that will continue to the same level of service the seller provided — perhaps with a few enhancements or new programs they can (but don’t have to) use.
When you promise to maintain quality service, mean it and live it.
Be Thoughtful on Branding
Propane companies have varying philosophies on whether to keep the brand name of an acquired business. Some buyers rebrand acquisitions, others retain the existing local brands.
There are positives and negatives for each approach, and there is no easy answer. Online platforms, back-office systems, vehicle signage and blended operations are all factors to be considered, as is the reputational value of both the buyer’s and seller’s brands in the community. Communication is the key, both with your customers and your internal teams.
Encourage Community Involvement
Propane owners tend to be pillars in their community, involved in or supporting a variety of activities. Look for opportunities to continue or start new sponsorships and encourage your employees to remain active in civic functions.
It never hurts to reach out to local leaders, bankers and others who are influential in the community. You will often receive information that will help you grow — not just retain — the business you purchased.
Empower Employees
Your new employees may have a better understanding of your new market area and customer base than you do, especially if you did not have existing operations in that town. Listen to them and make sure they feel empowered to help you retain and grow the business. Employees value even modest incentives that encourage them to drive customer retention and growth. Again, these incentive programs are a win-win-win, as customers benefit when your new employees help you provide better, local service.
Anticipate Change Together
At the outset, a buyer may reassure sellers, customers and employees that not much will change. And the seller and employees may reassure the buyer that they can accept a little change.
Despite these good intentions, at least a few changes are inevitable, and sellers and employees may balk at some of them. Gradually prepare sellers and employees from the outset with the changes you can anticipate and encourage them to provide advice and participate in advance.
Strengthening Trust Across the Transition
By following some of this advice, buyers can make the transition of a business much smoother and more profitable. It will be that “win-win-win” that we are all looking for — where sellers, buyers and customers alike see the benefit of a transaction.
I have framed this as sound business strategy, which I believe it to be. But it is not just about business. Valuing relationships with sellers, employees, customers and communities is not only good business, but also good corporate citizenship — and it’s the right thing to do.
