LP Gas, May 2017

Talking acquisitions What industry leaders are saying Can you discuss how the mergers and acquisitions market has been for your company in recent years I would say its grown in the last couple of years and a few players have gotten more aggressive BRETT KRAUSE executive vice president of corporate development at Energy Distribution Partners EDP Ive seen an uptick in activity based on the fact that there are distressed sellers and businesses after a few warm winters that impacted them heavily and theres the fact that margins are normalizing The warm winter of 2016 put some people in the scenario of needing to sell their business ERIC KRUGER vice president of corporate strategy and propane acquisitions at Ferrellgas 2016 was a pretty active year with lots of buyers at the table I would call 2016 a sellers market for sure The MLPs and other top sized companies were not quite as active but there seemed to be quite a few LP Gas Top 50 climbers that are very active ourselves included GEORGE KOLOROUTIS executive vice president and COO at ThompsonGas How have the acquisitions you made this past year helped your business These transactions all helped fill territory voids or helped us to expand outward from existing service areas DON SMITH director of mergers and acquisitions at MFA Oil Co We had what I would consider a good year last year We had a number of high quality operators join the EDP family of companies Finding acquisitions in the propane space isnt like going to the grocery store and picking out whatever you want on the shelf A number of things need to come together to match the needs of a buyer and seller When good opportunities come up were prepared to step up to the plate Thats what transpired with all of the agreements we completed this last year KRAUSE at EDP What are some trends that you foresee affecting the propane industry in the next few years The propane industry is still highly fragmented There will still be opportunities for consolidations in the next few years A primary driver for smaller independents to sell out is retirement and that driver wont be gone for a while We expect a decent ramp up in activity over the next two to three years JOSHUA WOLF director at Cetane Associates We foresee further consolidation in the propane industry in the upcoming years We also predict that pure play propane acquisitions will become a rarity especially in the Northeast as an increasing number of fuel oil marketers are adding propane to their portfolio CHRISTINA ARMENTANO director of business development at Paraco Gas I think you will continue to see an uptick in activity and continued consolidation Im seeing a lot of private equity businesses and others trying to roll up multiple propane businesses which is leading to competition I believe competition will only get fiercer with regard to buyers KRUGER at Ferrellgas according to Gary Papay founder and principal at The Oil Gas Advisor Another noteworthy reason independent retailers are turning to acquisitions is lower propane prices today compared with prices of a decade ago When prices were higher fewer independent retailers had the working capital to handle an acquisition says Steven Abbate managing director at Cetane Associates Today prices have dropped making it easier for smaller companies to strike a deal And its not just independent propane companies that are active in the market In the Northeast more heating oil dealers have sought to acquire propane companies as a way to supplant heating oils lost market share Abbate adds Its said that about 200000 heating oil accounts are converting away from heating oil each year he says While many of them are going to natural gas many are also going to propane So heating oil marketers are looking to enter the market and the best way to do that is acquisition of a propane company This has brought a whole new wave of buyers into the market Its uncertain exactly how many more buyers are in the propane industry today but Papay and Abbate note that they have helped to assist more independent retailers on closing deals today than in the past A lot of regional players seem to be in it for the long haul Papay says And I think well see more coming in not less I think this will be good for sellers as more competition for business makes this an attractive industry The independent retailers stepping up as buyers all have their specific reasons to buy such as lost gallons in the residential market goals to diversify or hopes of expanding into new territories Yet the overarching goal remains the same for all new buyers growth LP Gas connected with a few independent retailers to learn why they became buyers in the propane industry MERGERS AND ACQUISITIONS Continued on page 34 www LPGasmagazine com May 2017 LPGas 33