Convenience Stores Market Update: Seller’s Market Continues for Privately Owned Convenience Store Operators

Three Key Trends Drive M&A Optimism for Convenience Stores Market

Capstone Partners released its February 2022 Convenience Stores Sector Update, reporting that the gradual return to pre-pandemic travel, steady revenue growth, and aggressive consolidation have fueled optimism in the Convenience Stores market in 2022. As consumers have increasingly resumed traditional travel, sector participants have experienced a rise in guest counts and fuel sales, with leading players capturing substantial increases in revenue. Margin strength and pricing optimization have been key focuses for the sector as higher retail fuel prices have meaningfully contributed to sales growth through 2022.

Merger and acquisition (M&A) activity in the Convenience Stores sector surged in 2021 with 75 transactions announced or completed, a year-over-year (YOY) increase of 53%. Much of the initial transaction inventory in early 2021 was driven by the prospects of capital gains tax increases with many business owners expediting their exit timeline to lock in favorable tax rates. While the tax increase was not implemented in 2021, healthy valuations and an active pool of buyers drove deal volume in the Convenience Stores sector towards the end of 2021 and into 2022.

Private strategic buyers have historically been the most active acquirers in the sector, comprising 60% of 2021 deal activity. Rapid consolidation has been fueled by sector players aggressively competing to scale operations and diversify product mix, in addition to gaining valuable synergies through acquisition integration. The aging demographics of America also support the continuance of the consolidation trend, especially due to the highly labor-intensive nature of the Convenience Stores sector—creating an inevitable transfer or monetization of wealth. Moving forward, sector players are expected to increasingly pursue inorganic growth as a means of adding or expanding upon high margin areas of their business, including foodservice offerings. Large strategic buyers are anticipated to continue to demonstrate acquisition appetite, along with smaller regional players defending market share. This dynamic presents significant opportunity for business owners exploring a liquidity event.

Also included in this report:

• Commentary on the key drivers of premium M&A purchase multiples for privately owned businesses.
• Sector outlooks and transaction commentary from Capstone’s senior bankers.
• Insights from former Pride Stores owner, Robert Bolduc, following the Capstone-advised sale of Pride Stores to ArcLight Capital Partners.