Mergers and Acquisitions in the Global World of Self-Storage
|Copyright 2014 by Virgo Publishing.|
|By: Govert Derks|
|Posted on: 11/21/2008|
Self-storage is a booming business in Europe, with growth expected to follow the U.S. trend. Market leaders such as Shurgard Self Storage Europe have expanded significantly over the last decade. People are moving more often and accumulating more possessions driving the need for storage units of all types.
Consolidation in the self-storage industry appears to be spreading as several significant mergers and acquisitions (M&A) have occurred recently. Industry watchers are curious to see if the M&A trend in Europe follows the same pattern as indicated by events in Australia, Canada and the United Kingdom.
This article describes the reasons behind this trend, the advantages/disadvantages to self-storage owners and the overall affect on the industry.
Several industry giants have entered in to mergers or acquisitions over the past year. Here’s a sampling:
StorageVault Canada Inc. entered into letters of intent to acquire a self-storage facility in Winnipeg, Canada, for approximately $7.3 million and a portable-storage business in Regina, Saskatchewan, for approximately $1.35 million in May. The company’s goal is to become the exclusive master franchisee for the future development and operation of portable-storage facilities throughout Canada. It intends to grow through the acquisition of additional self-storage facilities and the development of portable-storage services.
Sydney, Australia-based real estate investment trust Valad Property Group sold its 50 percent interest in the $380 million self-storage portfolio it owns in a joint venture with Kennard Self Storage in June. All of Valad’s interest in the portfolio will be sold to the Kennard family over the next 18 months.
United Kingdom-based firm Close Investments Ltd. purchased a new self-storage site in Worcester, England, to be managed by Storage King, which has 45 self-storage sites across England and Wales.
Pros and Cons of Selling
In today’s current financial market, funding is more difficult and costly to acquire due to the financial crisis in the sub-prime markets. However, external financing for self-storage is essential to grow the business. Smaller companies with weaker balance sheets are having difficulty in arranging growth capital. Their alternative is to sell to a larger buyer.
The market for self-storage is maturing as increasingly more entrepreneurs enter the market. M&A generate economies of scale as more opportunities and companies become available. Overhead costs, such as expenses for information and security systems or upgrades to structures, can be allocated over more self-storage units.
Owners who sell their businesses to a larger corporation become part of the organization with resources, funds and time to organize operations more professionally. This is an advantage for the seller.
However, the disadvantage is the storage owner loses autonomy. There will be less freedom to make decisions on the fly, and following corporate policies and adhering to corporate reporting will be part of the monthly routine
A storage owner should plan the sale of his company well in advance, and use a business broker to assist in the process. This lets him concentrate on maintaining the facility’s profitability while the external advisor focuses on the transition of the business.
It is widely believed the industry will become more efficient as more mergers and acquisitions occur. This leads to better services at lower cost to the consumer. Economies of scale, the sharing of software and systems and financing opportunities are just a handful of the advantages to selling your facility to a larger company. The factors in turn will lead to the improvement and maturation of the industry.
Govert Derks is managing director of Corporate Finance in Europe, a mergers and acquisitions and corporate finance specialist focusing on projects in the records-management and self-storage industries. The company has an enterprise value between €2 million and €50 million. For more information, visit www.corporatefinanceineurope.eu.