Convenience Stores M&A Update – June 2023

Convenience Stores M&A Volume Unabated by Headwinds, Sellers’ Window Remains Open

Capstone Partners latest Convenience Stores M&A Update reports that, despite prevailing headwinds like elevated inflation and broader capital markets uncertainty, the sector has maintained a robust growth trajectory and demonstrated considerable resilience in the face of economic challenges.

The report highlights the sector’s defensibility of margins, economies of scale, and synergistic inorganic growth opportunities as key drivers behind its healthy performance year-to-date. Notably, the number of convenience stores operating in the U.S. increased by 1.5% year-over-year (YOY) in 2022, marking the first YOY increase in four years, indicating a positive growth trend in the sector. This growth has been fueled by the entrance of new players, motivated by strong sector growth prospects.

While other sectors in the Consumer industry have experienced slowing M&A activity, the defensibility and scalability of the Convenience Stores space have spurred consolidation efforts, and acquirers have maintained a particular focus on optimizing efficiencies through economies of scale. While middle market buyers in other sectors have displayed a risk-off mentality, completing acquisitions of smaller companies that require less cash outlay, the Convenience Stores sector has been home to multiple transformative transactions and seen the median store count among target companies rise in YTD 2023.

This sustained demand and robust valuations have created a favorable environment and opportune window for privately-owned operators to consider liquidity events and capitalize on favorable conditions. However, it remains uncertain how long this window will remain open before a broader market correction affects Convenience Stores M&A conditions.

Also included in this report:

• Examination of the Convenience Stores sector’s growth trajectory through YTD 2023.
• Commentary on the key drivers of premium M&A purchase multiples for privately owned businesses.
• Insights into how the sector has managed to sustain robust demand amidst economic challenges.
• Perspectives and outlooks from Capstone’s senior bankers on the strategic landscape of the Convenience Stores market.