Acquisitions can make sense

As we have discussions of Bertram and it's place within Ferretti and we see other acquisitions where changes haven't worked out, there is one recent acquisition that appears to have great potential. Now it's not in the "Yacht" world but still the same synergy could apply if.

Beneteau acquired Rec Holdings which had been owned for 4+ years by Platinum, an investment firm. Previously the brands were part of Genmar. Those brands are Glastron, Four Winns, Wellcraft, and Scarab.

The benefit to Rec Holdings is knowing who will own as previously it was just wait and see. But more it's access to Beneteau's dealer network. Basically it's the ability to show and talk to 400+ dealers, primarily in Europe. The indication is that many of those dealers will take on one or more of the lines.

The benefit to the Beneteau brand is initially to their outboards. Rec Holdings has the capacity to manufacture these in the US. And immediately, Rec Holdings will be marketing them in the US. Previously only the two Barracuda models of 7 and 9 meters were sold to the US market. There are 4 Antares outboard models from 5.8 to 8.8 meters. There are 9 Flyer models from 5 to 8.5 meters. This has huge potential as outboards are a growing market while stern drives continue to falter. For the most part Rec Holdings has no boats similar to these 15 models.

So the acquisition really serves the purpose of opening markets to all the brands involved. And there was a real plan from the date of acquisition. What the results will be, we don't know. But we do know that there is a plan to make the whole greater than the two were and to build based on some obvious opportunity.

Well, first, yes acquisitions are acquisitions. Check the dictionary and it will say that too.

And, yes, everyone is always wanting to increase market share. Why wouldn't they? Acquisition or not that's the goal.

As to the Chinese and fat wallet, you make that sound evil. Yet, were it not for the Chinese purchasers, Ferretti would have had to go through some severe turmoil and problems and would probably have already downsized some. Yes, they are not linked with an umbilical cord to the brands. But they stepped up when the company needed someone to save it. And they have the resources to keep it alive.

You're saying Bertram was dead in 1998 when Ferretti acquired them?

Ferretti got greedy, made acquisitions, ran up debt. But really things started to suffer after the death of Alessandro Ferretti. In 1995, Permira bought 70%. In 2006, Candover took control through a stock auction. They ended up losing their investment. Time after time the company was going to have an IPO, then had to pull back. So the debt would rise out of control over and over and they'd always need someone to step up and convert debt to equity. This time is was the Chinese.

Was this latest acquisition an acquisition? Yes. Was it beneficial to Ferretti? Yes. It was essential to save them. And if you acquire a company that has been losing money and building up debt, you're expected to make changes.

Now that has nothing to do with the synergy of the acquisition of Rec Holdings by Beneteau. That is the way you hope they can work. Some do, some don't. But the Chinese are not the villains in the Ferretti or Bertram story. Who knows what they will ultimately do.

Family businesses face the challenge in all industries. You don't have kids or they don't have the desire to continue. Estate taxes mean you have to sell. And then often the good designer isn't such a good businessman and when the economy is weak that comes out.

Every purchase by a private equity firm leaves you wondering what the future holds as they are designed to lead to another sale some time down the road. Rec Holdings was probably fortunate that Platinum sold to Beneteau. Now you look at Hatteras now owned by Versa Capital Management. Who will their next owner be?

Companies staying under the same ownership for decades has just become rare, especially in this industry.

There are very few companies in the industry today where the owners are passionate boat people and have the capital resources and business acumen to survive long term.

One other factor is that Richard Bertram and many others are successful with small companies where they can keep an eye on everything going on and maintain control. But then they company grows beyond their ability to do that and they don't have the experience and skills necessary to manage less hands on. The most difficult company to run is middle sized within an industry. Small is simple as it's all right in front of you. Large can be simple as volume can overcome a lot of mistakes. But mid sized companies need the systems of large companies at the price of small ones.

Not a lot of family builders remaining. And when one decides to sell, it's great if they can select the perfect buyer, but that generally isn't an option. They have to sell to whoever will pay the price.

It's not all gone. There are still companies that provide service and pursue quality. And time to stop blaming the "bean counters" and share some of that blame with consumers and greedy owners too. It costs to provide quality service and too often consumers made it clear price was more important than service. When people flocked away from mom and pop stores to K-Mart and Walmart they did. Soon mom and pop were there no more. When boaters chose a financially unstable and historically shaky company like Northern over others such as a family company like Nordhavn. There are still quality boat builders and some of those are family run or at least run by a long line of true boaters. Look at a company like Westport owned until recently by Orin Edson, a pioneer in the industry, and now owned by the Chouest family, a multi-generational family of boaters, fishermen, boat builders who also build and supply off shore vessels and build sportfishing boats with ACY. Some of the dutch builders are like one large family. And it doesn't have to be family to be run right. There are some very good builders. Capt J is going to preach Jim Smith. Well, he is a true boater and builder. Look at Viking with the Healey's. In the 90's they went from 1500 to 80 employees but somehow weathered the storm. They were determined boat builders, not ready to cash in and move on.

I understand McDonald's and others who charge for extra condiments. One orders 8 pieces of McNuggets and asks for 8 things of Barbecue sauce and that happens more than you'd realize. People stock up at home if allowed. But most towns still have a few local diners run by families. That's always a choice.

Look at the Beneteau family. There's a reason that when the sale of Rec Holdings to Beneteau was announced to the employees in the plant there was wild cheering. This isn't criticism of Platinum. They saved those companies. They strengthened and rebuilt them after the Genmar fiasco. But they were always temporary and the employees knew that. I'm sure many many potential buyers were seen walking through the facilities and the employees figured out who they were and were probably scared of some of those buyers. I've been there early in my career. Company talking to some buyers I sure didn't like. That's why I proceeded to start talks with a better buyer and fortunately that's who we sold to.

Every merger or acquisition, every buyout, changes things. I believe the Beneteau acquisition changed things in a positive way. I believe the Chouest acquisition is positive. If Burger was to announce that they were selling to Moonen, then I'd cheer that. And the big company isn't always negative. Sometimes they are positive although that may be for a limited time.