The upcoming Coffee, Tea and Water Show (CTW) in Las Vegas might seem secondary compared to the April NAMA Show, but for any operators considering an exit strategy, it is a show to attend for several reasons. Among them, the upside potential of OCS.
Buyers will be there
Certainly – companies on the buy side will attend the show. As an OCS operator, you should too, even if your exit strategy is months, even a year away. Why? Because OCS is highly profitable and sought after by buyers. Anything you can learn to enhance the growth of your OCS and water business, will be worth its weight in gold. Plus, if you have been reading my newsletter, you know how I feel about the importance of being visible in the industry. Being a known entity is helpful when you are selling your business.
Is OCS really making a comeback? Slow and steady growth in many market areas, certainly not all. Based on the Automatic Merchandiser 2021 State of the OCS Industry Report, sales were stagnant in 2021, following a disastrous 2020. If we were in the basement in 2020, we made it to ground floor in 2021. There is nowhere to go but up.
A Fortune article published just one month ago pointed to data that supports some real movement in return to office (RTO). “Data suggests the long-predicted RTO is indeed starting to happen, after several false starts. But just how far it goes remains to be seen, and few expect a return to pre-pandemic normalcy anytime soon,” wrote Steve Mollman of Fortune.
Also from the article:
“September feels more like the real return to the office that has been touted for two and a half years now,” Peter Greenspan, WeWork’s global head of real estate, told Bloomberg this week. “You've heard, ‘Return to the office, return to the office, now it's after this holiday, now it's after this summer.’" But new data from his firm, he said, suggests a “stronger return to the office than the previous ones.”
Optimism from Kastle Systems
Offices in New York City, meanwhile, were nearly half full the last week of September, compared to 38% the week before and 34.5% two weeks earlier. That’s according to Kastle Systems, a security firm that tracks keycard swipes in offices across the U.S. It also reports that office occupancy nationwide has remained steady at around 40% of pre-pandemic levels since the spring. That’s hardly back to normal, but the firm is confident those levels will “rise in the months to come,” Kastle declared on their website.
Dissing remote workers
According to the Fortune article, CEO’s and the possible recession are making RTO inevitable, which will give OCS every channel of convenience services a nice sales boost.
In September, BlackRock CEO Larry Fink said his firm would “be taking a harder line as to how we bring our employees back.” Workers were told they needed to come into the office three days a week, with exceptions being rare and needing “formal approval.” Remote work, Fink argued, was one reason for falling labor productivity in the U.S.—and RTO would help bring down the nation’s record inflation.
Tesla CEO Elon Musk now receives detailed weekly reports on absenteeism, according to CNBC, after saying in May that “remote work is no longer acceptable.” Workers unhappy with the change, he added at the time, should “pretend to work somewhere else.”
JPMorgan CEO Jamie Dimon, meanwhile, continued his long-running criticism of remote work last month, saying it creates an environment that’s less honest and more prone to procrastination.
How OCS can impact a deal
Here is an example of what I am seeing right now and how growing OCS sales can impact a deal:
I’m working on a slow-moving sale right now and based on the sales formula, the longer the deal drags out, the higher the price will be. So far, the seller is enjoying a 20% bump in the selling price as the buyer tries to get his ducks in order. Being patient is paying off for the seller. For the buyer, the deal looks mare attractive, even though it will ultimately be more expensive. The important takeaway from this situation is that sales are coming back, and prices are rising. OCS, which typically carries the highest sales multiple, will have a big impact on selling prices.
Learn something and watch it pay off
If you can learn something at the CTW Show that can boost your OCS and/or water sales, it will certainly pay off when it is time to do a valuation on your company. Like OCS, the profitability of water is valued by buyers and the revenue consistency makes the water channel particularly attractive. Additionally, since OCS is often a conduit to additional business – like micro markets, vending, cold brew and even pantry service – OCS growth can really pay off.
Good timing for sellers
If you are considering a sale of your business in 2023, your timing is excellent. We have a proven process at VBB Advisors that can easily allow you to accomplish your objective before the end of Q1 in 2023. The key to seeing that happen is to start the process now and enjoy the comfort of working with a sell side broker.
Trust is important
As a convenience services operator who has worked hard to build a business, often for decades, there is no reason to feel that deep discomfort that comes from a lack of trust. Is your broker favoring the buyer or the seller? That’s hard to say, but you’ll be asking that question long after the deal is finalized.