Companies that incorporate mergers and acquisitions into their long-term strategic planning may be better positioned to take advantage of macro- and microeconomic conditions that impact deal-making in their favor. The 2020 challenges impacted and continue to impact all industries, however unequally. In yachting, reports in the months of March, April and May highlighted challenging times yet as the seasons, understanding and behaviors changed, spending time out on the water grew in attraction and led to records sales in many segments.
While there were many interesting deals completed in 2020 (some examples here), 2021 has seen a steady stream of deal announcements over the first 12 weeks of the year. Of the eleven deals reviewed for this article, all buyers were experienced acquirors, bar one. The sole exception was a deal completed between two relatively new companies in the electric boating space (Pure Watercraft, founded in 2011 and on the heels of a Dec 2020 $37M capital raise, acquired ELUX Marine).
Strategic Options: Expanding Distribution and Breadth
From a strategic perspective, typically one of four reasons are mentioned or implied when explaining the high-level rationale for an inorganic move: gaining market share by selling more of the same product to the same market (consolidation), expanding into new markets (distribution), expanding a product or service portfolio (breadth) or diversification (pursuing both new markets and new products) (See Figure 1). In this group of deals the buyers were either expanding their products and services portfolio (6 out of 11) or expanding their customer or geographic base (5).
Those expanding their geographic footprint included buyers that are marina or dealership operators that have been intentionally growing through inorganic efforts. Suntex’s acquisition of Prime Marina Miami expanded its Florida base to five locations. Safe Harbor Marinas was in the news again early this year with the acquisition of Rybovich, a premier superyacht marina and service facility. As sophisticated buyer, Safe Harbor has completed over 100 acquisitions of marinas around the country. Interestingly, last year Safe Harbor itself was acquired by another experienced acquiror, Sun Communities, a real estate investment trust (REIT) that appeared to join other REITs in expanding the breadth of its portfolio.
2020’s negative impact on the mid-to-long term outlook for many REIT portfolios, traditionally more weighted towards hospitality (e.g., hotels, restaurants), commercial (e.g., office and retail space) or others segments, made marine real estate an attractive alternative for capital investments. Southern Marinas leadership noted they were capitalizing on that dynamic by selling off their existing portfolio at this time. Two other buyers leveraging the breadth strategy were Garmin and ACR Electronics. Garmin expanded their product/services portfolio with the acquisition of GEOS (emergency monitoring and incident response services); while ACR Electronics, a provider of emergency beacons and life-saving products, acquired Bivy a satellite communication device and outdoor adventure app provider.
At Capstone we believe that M&A is useful tool for growth and should regularly be considered as a complement to organic growth initiatives. As a potential buyer you should evaluate what strategic option makes the most sense for you to pursue and whether an acquisition might help your company achieve its goals more efficiently or quickly compared to an organic move. If you are a business owner, we encourage you to consider an exit as an option when evaluating succession plans; selling one’s business is almost always an emotional journey so proactively positioning your company for an exit may allow you take advantage of unexpected market dynamics.
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About the Author – Edelweiss Harrison is a Vice President and Head of Strategy at Capstone. While Capstone overall is industry agnostic, Edelweiss leads the efforts to serve companies in the yachting / marine value chain. A strategic advisor for more than 20 years, Edelweiss works with business owners and C-suite executives to define their vision for the future, prioritize opportunities while also evaluating organic vs. inorganic approaches for different situations.