Valuing and Acquiring Home Energy Businesses

This is a series of five articles on the subject of acquisitions including:

Introduction

Industry Trends

Finding a Company and Making an Offer

Performing Due Diligence and Closing the Transaction

Transitioning Your Acquired Company

We are in an industry which has seen gallons evaporate due to conservation and conversion to other energy sources.  The use of the Internet has changed the way consumers shop for a fuel company and a weak economy has turned many homeowners into value shoppers. One thing for sure is that our industry is in a crisis. When looking for a definition of crisis I found several sources, but all of them had one similar meaning.

Crisis

<I>The point of time when it is to be decided whether any affair or course of action must go on, or be modified or terminate; the decisive moment; the turning point.</i>

In any crisis, there is an opportunity.  I have heard it said that more millionaires were created during the Great Depression than any time in history.  I believe the crisis we are experiencing in our industry is a great opportunity for innovative marketers to prosper and grow.  Acquiring other marketers is a great way to accomplish your growth goals.  Through this series of articles we will explore the process of acquisitions and share some insights which will help you accomplish your goals and help you prosper for many years.

Acquisitions are all about a return on your investment.  That investment is both a financial one and an investment of your time.  Banks are currently very willing to lend money to most marketers at competitive levels, which allow marketers to achieve substantial returns above lending interest rates. Even with continued conservation and conversions, home heating oil and propane will continue to be a source of energy for many generations in the future.

Recently, I have had the opportunity to meet with several banks who are interested in lending money to companies for acquisitions.  The banks were all aggressively seeking to lend money at very reasonable rates. They all stated that the home energy business sector is attractive to them as they see this sector as recession resistant.  Banks still have some of the same concerns fuel marketers have.  They are concerned about attrition from conversion as well as conservation.  I have found that they particularly focus on price protection speculation and cash flow management.  While they have concerns about these challenges, they are very supportive of companies who manage their business well and have a good track record.

While financial return is always the major consideration in acquiring a company, making an acquisition is a very rewarding experience in other ways.  In addition to the great return on your investment, it is a morale booster for your employees.  Employees like to see their company grow.  They know that with a growing company they have more job security and an opportunity to advance their careers.   Service technicians in particular appreciate less on call time which results from having more technicians to cover the needed hours.  Many customers also appreciate the services that a larger company can offer such as more service technicians providing quicker response times, extended hours where they can speak with an employee and not an answering service and many times larger companies offer additional services such as air conditioning repair and in house installation of HVAC equipment.

There is a certain fascination with acquisitions in our industry and there is a misconception that all the acquiring is done by large multi-state marketers.  Acquiring a business is a process which is very attainable for most marketers.  The process includes finding a good acquisition prospect; calculating a competitive purchase price; structuring the offer for a smooth transaction; presenting the offer in a clear concise manner; navigating the closing process and transitioning the company successfully.

Remember that a crisis is a turning point and that turning point is an opportunity to bring prosperity and a bright future.  A good strategic acquisition will help to bring future prosperity to you and your company.