12 TOBACCO BUSINESS | NOVEMBER / DECEMBER | 22 One way to grow your tobacco retail business is through acquisitions. One business taking ownership of another established business probably conjures up negative thoughts for some, but in reality, acquisitions are not all bad. In many cases, they’re good. Businesses are acquired for different reasons. Some business owners are looking for an exit plan. The economy or a life circumstances may make it appealing to sell a retail store and make some money from its closing. For those looking to buy a business, growth is typically the goal. With each acquisition, a retailer is able to expand their store’s footprint. The acquired stores come with assets, new employees and also new opportunities in new markets. For Smoker Friendly International, acquisitions have been vital to the organization’s growth strategy for years. In August 2022, Tobacco Superstore was acquired by Smoker Friendly International. The owner and CEO of Tobacco Superstore, Joe Marelle, reached out to Smoker Friendly International’s CEO, Terry Gallagher Jr., about selling his company to him.While it can take awhile for some business owners to come to a decision of whether or not to sell, it took Marelle just 15 months to complete the deal. It’s business deals like this that have helped Smoker Friendly International become the largest tobacco store retailer currently operating in the U.S. In the interview that follows, Terry Gallagher Jr. and Dan Gallagher, Smoker Friendly International’s chief operating officer, offer tips for those retailers who are looking to sell their businesses and the entrepreneurs interested in growing theirs through an acquisition. TobaccoBusiness: What does Smoker Friendly International look for in terms of a possible acquisition? Terry Gallagher Jr.: If the chain is not within the current footprint of our corporate stores, there has to be enough scale to warrant “boots on the ground” or local supervision. We won’t typically consider a single store or a few stores that fall outside of our current geography. Obviously, if there is scale, we have an interest, as demonstrated by our purchases inFlorida,Missouri,NorthCarolinaandLouisiana inpast years— and the recent acquisition of Tobacco Superstores based in Arkansas with stores also in Tennessee, Mississippi, Missouri and Kentucky as well as Collett Enterprise’s Smoker Friendly stores in Indiana and Kentucky that were acquired in 2022. We look for chains that are well operated and profitable and accretive to our business. These chains have teammembers that are experienced and understand the business. They become valuable members of our Smoker Friendly teamand strengthen and add to the depth of our management team. DanGallagher: We also look at their size in a geographic area, strong sales trends, profitable stores and strong people in the organization. What are the easiest and hardest parts about an acquisition? Dan: Making the deal is the easiest part. Preparing for the acquisition, integrating systems, getting personnel comfortable with Smoker Friendly and post-acquisition operations are the hardest parts. Terry: The easiest part on the front end is identifying targets we’d like to pursue. The harder part is getting from there to the deal! Are there any red flags that you look out for during the acquisition process? Terry: We go through a very deep dive during the due diligence process. Depending on the size of the acquisition, we will perform all due diligence internally and verify that the business is accurately representing its operations and financials before moving forward with a transaction. If it’s a more sizable entity, then we will perform our typical internal work but also have an outside firm come in and complete a quality of earnings analysis on the subject company. This O STARTUP : MARKETWATCH THE ART OF THE DEAL Learn howacquisitions can be used to grow your retail business with tips from the CEO of the largest tobacco retailer in the U.S. Photography by Anthony Camera Terry Gallagher Jr., CEO of Smoker Friendly International
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