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In looking back on the 25 biggest mergers and acquisitions of the past 25 years, you get a sense of the movers and shakers of the retail propane industry.
The majors AmeriGas, Ferrellgas and Suburban Propane were all involved in notable deals over the years, especially early on, and new players have emerged to help reshape the market. Check out the comprehensive list in our May issue.
While our list might help jog your memory of a particular deal or role you might have held in the industry at the time, it doesn’t tell the full story of where the market stands today or how things have changed with M&A.
For one, the majors don’t appear as active in industry-shaking acquisitions today as they were a decade or two ago when our Top Retailers rankings were undergoing a dramatic change. After AmeriGas acquired Heritage in 2011 and Suburban acquired Inergy’s retail propane operations a year later, no major made a retail propane deal that landed on our “top 25” list.
In fact, a May 2022 LP Gas article about consolidation patterns in the propane industry revealed that the share of retail propane gallons sold by the industry’s top 10 companies remained relatively unchanged since 2000 and ranked below the 20-year average (2000-20) in recent years.
“While many deals stand out over the years, what stands out to me the most is more of a trend,” shares David Reynolds, COO of Blossman Gas. “There are acquiring companies of varying sizes in our industry. Propane companies ranging from local retail companies, regional retail companies, multi-state companies or financially backed strategic companies are all looking to invest in the propane market.”
While the largest companies were making deals with one another in the past 25 years, taking a lot of time and effort to blend their operations, some of the smaller companies and regionals found room to grow, says Derek Ashmore of B&A Energy Partners.
“In the late ’90s to the mid-2000s, the barrier to entry into the retail propane industry was relatively low,” Cetane Associates shares in assessing the market. “It was common after an acquisition for an employee to decide to start their own company or to acquire a small competitor as entry into the business. Many new propane businesses were founded by entrepreneurs aiming for strong investment returns – some even using their 401(k) savings as startup capital.”
A panel at this year’s National Propane Gas Association Southeastern & International Propane Expo in Charlotte, North Carolina, featured three individuals who revealed how they built their propane businesses to sell.
But it’s not as easy today, M&A leaders explain, because the cost of doing business is up – owing to the economic climate for propane companies, including the rising price of steel, vehicles and many other operational needs. Tight regulations don’t help either. So the barrier to entry is higher, leading to another M&A trend: private equity.
“While the last 10 to 15 years have still seen individuals launching propane businesses – often with the goal of eventually selling – many entrepreneurs have turned to private equity funding to support their ventures,” Cetane shares.
Private equity-backed companies tend to prioritize growth through acquisitions and consolidation, the firm adds, rather than relying solely on organic expansion.
“It’s all cyclical in how it works out,” says Tamera Kovacs of Cetane, describing the market dynamics. “The difference is now we’ve got a lot of private equity money coming in, so the acquisitions are being done on a bigger scale and faster.”
In some states, Kovacs says, that fast pace has led to a sharp decline in independently owned propane businesses.
“It wouldn’t surprise me to see independents popping up in those areas because of the opportunity,” she says.
So the cycle will continue for the industry, as will the acquisitions.
“I think there will be some shake-up in the next couple years,” says Barrett Conway of Cetane. “There could be something big on the horizon.”
We’ll be on the lookout. In the meantime, let us know your thoughts about the 25 big deals inside this issue.
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