In the past decade, PE-backed groups have expanded significantly in UK petrol station forecourts. Private equity’s share of UK petrol stations has nearly trebled from around 7% to almost 20%. Much of this growth has come from the oil majors, whose share of UK petrol stations has almost halved from nearly 30% to about 15%.
PE-backed growth in the sector has not been a classic buy-and-build. Much of the PE firms’ growth has came from relatively few acquisitions, and sector ownership was already concentrated at the outset. In other sectors, buy-and-builds have typically involved more acquisitions, and the starting point for sector ownership has been more diffuse.
Nevertheless, PE-backed expansion in petrol station forecourts has provided valuable insights for Aldwych Partners’ White Paper on Buy-and-Builds and Competition and Markets Authority (CMA) intervention risks. Nearly 35 M&A deals in the sector were identified by Barber Wadlow, property advisers to the sector, in their annual reviews between 2012-18. More than half involved acquisitions by MFG, MRH and Euro Garages, three PE backed groups in the sector.
Until 2012, involvement by the CMA (and its predecessors) in the sector was rare. When petrol stations had crossed its radar, it was mainly as a small component of larger supermarket deals. After 2012, however, the CMA investigated a quarter of all petrol station M&A deals.
The catalyst for CMA intervention was Rontec’s acquisition of more than 700 petrol stations from Total, which then sold 254 stations on to Shell and a further 18 to Sainsbury’s. Each of these deals was approved by the CMA, with only a handful of divestments required.
In subsequent years, the CMA investigated acquisitions by both MFG and MRH. This included MFG’s acquisition of more than 200 sites from Murco and MRH’s purchase of nearly 80 sites from Esso. CMA intervention remained minimal, leading up to MFG’s acquisition of MRH in 2018 where around 7% of the acquired portfolio (38 sites) had to be sold so as to gain CMA clearance.
CMA interventions in Petrol station forecourt M&A, 2012-18
Successful though MFG and MRH were in navigating the CMA review process, Euro Garages, however, went one better. None of its acquisitions were subject to CMA intervention, including major acquisitions from Esso in 2013 and 2015 as well as several smaller acquisitions in later years. This, no doubt, saved it from considerable expenditure. CMA reviews, even when a clearance is achieved, are increasingly expensive as a result of their impact on business performance, delays to integration savings and requirements on management time.
Download our White Paper for insights on short-term and long-term strategies that buy-and-builds can adopt to manage the risk of CMA intervention.