We have heard that for many unattended and self-serve retail operators that succession planning is top of mind. And with this, a discussion emerges around selling their business and how to get the most value for it.
With the continued integration of next-generation technology across the unattended retail industry, what was once a simple “tuck in” transaction where an acquirer would essentially be purchasing the machines and routes and tacking them onto their existing business has changed. Now, more than ever before, acquiring companies are considering technology integration as an integral piece of not only what the company is worth, but whether it is worth buying at all. Those that are equipped with the same, or compatible, technologies can be more attractive and earn higher valuations when acquiring companies are considering operational integration.
Earlier this year, we hosted a panel during NAMA and asked several leaders within large unattended operator businesses about the role technology plays when considering acquiring a company.
According to Duncan Smith, President and COO of All Star Services, “If you have someone with zero technology, it’s valueless. How much you are willing to pay for a company depends on how you can roll it up. It can be very time consuming and take a lot of investment.”
Bradlee Wilson, Operations Manager at K&R Vending Services echoed this sentiment by saying that “We look at the same topline, and subtract money, time, the hassle it takes to bring their operations up to our standards. If someone is fully deployed with platforms that I can get under one umbrella, there is less subtracted from the top line.”
Jared Detwiler, Vice President of Operations, One Source Office Refreshment said, “I’m not willing to pay good money for companies that don’t have technology.”
Let’s consider how the industry has shifted over the last decade. Ten years ago, VMS really didn’t rely on cashless technology. Operators had a VMS and cashless platform, maybe, but not usually, on every one of their machines. Nobody was thinking about how these systems worked together. Fast-forward five years and technologies like DEX MDB, cashless, telemetry, VMS, and pre kitting are all interconnected and those that have these systems working together are earning the biggest bang for their technology investment.
However, the element that is most overlooked when making technology investments is “What is this investment going to be worth to someone I sell my company to at a future date?”
Here are some considerations for unattended operators who are considering investing in technology.
Step 1: First upgrade your machines to Dex and MDB (multi dropbox). Any technology requires these upgrades, and this simple investment will increase the net value of any company.
Step 2: Consider your cashless payments and telemetry device technology. This is where it can get subjective, as you want to pick a technology that has the greatest chance of being compatible with a potential future buyer. If you buy a cashless system from a company that not a lot of companies use today, then more than likely when they buy you, they’ll have to replace it and it will earn your company a lower valuation. The issue here is that different processes make it difficult and cumbersome for an accounting department to manage. Do your research and determine which system is being used the most across larger companies.
Step 3. Once you have done your research and selected a top cashless and telemetry technology platform, look for a pre-kitting technology and VMS system that can layer on top of this. Once again, research is critical here, and make sure you pick the right system that is most likely in the warehouses of possible acquiring companies. Be sure you consider next-generation technology partners that have the capabilities of working with other VMSs.
The likelihood that an acquiring company will give a high valuation for a company that requires them to rip out or re-do technology to align it with their own is slim. If you are considering selling your business, look at which companies acquired the most operators in the last few years. You’ll see that the top companies buying operators are Canteen, AVI, Imperial, Accent, Continental — every one of them are on the USAT technology platform.
When considering where to invest your technology dollars the value that you can get by investing in USAT not only provides increased sales, transactions and savings through operational efficiencies but additional return-on-investment if it comes time to sell your company through the best valuation.
At the end of the day, it really is less about investing in technology that makes you more valuable, it’s about investing in the right technology.