Valuing and Acquiring a Propane Business
Update July 2022 | Cetane Associates’ Tamera Kovacs and Joe Rosengrant recently spoke at the Minnesota and Mid-States forum.
This presentation addressed several key elements of valuing and acquiring a delivered fuels business. It is not comprehensive yet gives owners essential data points to contemplate in their process.
Key take-aways for owners considering making an acquisition:
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Reasons to Buy:
- Acquisition is the fastest way to grow your business
- Acquisition opens the door for diversification
- Above market return on investment (ROI) and return on equity (ROE)
- Great for company morale and to gain skilled employees
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Key Points in Evaluating the Seller:
- Geographical
- Financial information
- Product and service mix
- Employees
- Property purchase/lease
- Customer demographics
- Cultural fit
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Preparing to Buy a Business:
- Meet with your bank
- Develop relationships with owners
- Talk to vendors
- Contact industry brokers/advisors
- Advertise
- Search the Internet
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Business value is based on Operating Income (EBITDA)
- The 3 EBITDAs
- Owner’s EBITDA — from financial statements
- Adjusted EBITDA — adjusts for non-recurring revenues and expenses
- Buyer’s EBITDA — adjusted EBITDA with synergies and adjusted expenses
- The 3 EBITDAs
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What’s typically included in the Purchase Price?
- Included
- Customer list
- Propane tanks in the field
- Intangibles
- Vehicles
- Furniture, Fixtures, & Equipment
- Real Estate (if purchased)
- AR
- Excluded
- Current assets (cash, non-company inventory)
- Liabilities (AP, notes payable)
- Agreed upon select assets
- Included