The consolidation question facing propane retailers

I grew up in the propane business the same way a lot of us did – riding in the passenger seat of a bobtail, going on service calls with my old man and probably breaking a few child labor laws and insurance rules.

As a kid, I spent many nights and weekends in the shop that smelled like propane, cigarettes and grease. I heard too many bad jokes from guys who are an ode to the days of propane past. I was the flashlight holder, the pipe dope fetcher, the wrong-size pipe wrench kid and the one hoping maybe I’d still get paid even after messing something up.

That was my introduction to the propane industry.

My dad worked for Dix O Gas, a multi-location Utah company. Back then, it felt like a smaller company. Today, an eight-plus-location retailer would be considered a pretty solid operation. But what I remember most was not the size. It was the culture. It felt like family.

I remember the company parties and how they made everyone’s family feel important. On the occasional visit to Dad’s work, I always felt welcomed. The owners were involved in the state propane association. Back then, it was the Utah Propane Gas Association, and my dad had plaques and certificates around the house and office that I used to look at and wonder about. I did not totally understand it then, but I do now.

Then I watched the business side of propane do what it does.

The company was sold to Petrolane. Then another merger. Then another new name on his paycheck, another new process. Then another ownership change, another new boss, another set of rules, another uniform, another logo on the truck. My dad got a front-row seat to the merger and acquisition circus. As a kid, I was oblivious to the impact these changes had on my parents.

▶ Starting a business

At some point, he’d had enough.

He stepped off that ride and started his own company. I spent 23 years working with him before landing where I am now. So when I talk about mergers and acquisitions, I am not talking from the cheap seats. I have lived it.

And the truth is, consolidation is not new. It has always been part of the propane business. The big companies grow by buying, and it is not only the big three. More mid-sized, multi-state companies are hunting too. You see them at conventions, trade shows and meetings, smiling, shaking hands and quietly looking for their next deal.

What has changed is how hard it is to build something from scratch.

The cost of borrowing money is up. Trucks, equipment and steel cost a fortune. Insurance is brutal. Compliance never gets simpler. Years ago, a motivated guy could scrape together some used equipment, line up supply, build a customer base and grow a good company. That road still exists, but it is a whole lot steeper than it used to be. The reward vs. risk ratio is getting narrower.

At the same time, family-owned propane businesses are getting calls weekly from buyers looking to expand. Add in states, cities and towns chasing “fossil-free” fantasies and energy policies built on politics instead of common sense, and it is no wonder owners are asking, “When is the right time to sell?”

I get asked that question all the time. I do not have a crystal ball, but I do have one strong opinion: When that day comes, do not forget who helped you get there.

▶ Value associations

Do not forget the years of lobbying, code work, safety training, regulatory fights and political battles that helped keep propane relevant and competitive while you were busy running your company. Associations are not just dues notices and annual meetings. They are part of the reason your business has value.

So when it comes to selling, don’t just chase the biggest check.

Ask whether the buyer will support the association. Ask whether they will stay involved. Ask whether they are willing to help fight for propane in your state instead of just cashing in on the work others already did.

Ask if they support the state of the association.

Tom Clark is the executive director of the Rocky Mountain Propane Association, Colorado Propane Gas Association and New Mexico Propane Gas Association. Contact him at tom@rmpropane.org or 801-725-1925.

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