Despite persistent inflation concerns, some continued supply-chain challenges and fears of a looming recession, mergers and acquisitions continue in the recreational marine industry. The past year has seen some noteworthy deals among boatbuilders, engine manufacturers and other companies.
Some executives involved in key acquisitions tell Soundings Trade Only they are cautiously optimistic about the state of the economy in terms of deal-making. Others say they don’t expect mergers and acquisitions to grind to a halt, but they do think a realignment is in order that could slow negotiations compared with years past.
“The boating industry may be feeling a little more pain than the rest of the economy — the towboat segments are down 20% or 30% while the economy is flat,” says Bill Yeargin, CEO of Correct Craft. “It’s going to be tougher to do acquisitions in the next year because of the uncertain market. Sellers want to sell based on the results from the last couple of years, and buyers know the market is declining.”
Higher interest rates at lenders are also on executives’ minds when it comes to deal-making, but some, including Suntex chief investment officer Chris Petty, say they see the increased cost of credit as a possible incentive for smaller companies to seek out buyers in the coming months. “The interest rates have increased for everybody,” he says, focusing on the marina space. “Where independents have refinancing pressure, it may open up some opportunities.”
Deals of the Past Year
Mergers and acquisitions took place in just about every sphere of the marine industry this past year. Some of the highest-profile deals were by boatbuilders, including Kadey-Krogen, which bought American Tugs in May; Twin Vee, which bought Aquasport in May; Nimbus, which bought EdgeWater Power Boats in March; and Iconic Marine Group, which acquired NauticStar Boats in September 2022. Also among leading boatbuilders, Princess Yachts announced this past February that KPS Capital Partners had acquired a controlling interest in the company, while allowing shareholders to retain ownership in the British builder.
In the marina space, deals within the past year have been aplenty. These include Safe Harbor Marinas taking ownership of Savannah Yacht Center; Suntex buying Fair Haven Yacht Works in New Jersey, as well as Roosevelt Lake Marina in Arizona and Legendary Marina in Florida; MarineMax paying $480 million for Island Global Yachting and its various locations; Monument Marine Group acquiring Harbor Lights Marina in Rhode Island; TopSide Marinas buying Rock Creek Marina in Kansas; Paradise Point Marine Group acquiring Paradise Point Marina and RV Park in Alabama; Port 32 Marinas taking over Lighthouse Point Marina in Florida; Integra Investments buying The Perry Marina in the Florida Keys; and Off the Hook Yacht Sales acquiring Sloop Point Marina in North Carolina and Georgetown Yacht Basin in Maryland.
The marina space, in particular, shows no signs of slowing. Petty says Suntex hopes to add another 15 locations in the next 12 months. “We’re seeing very strong consumer demand for space,” he says. “That certainly has not changed. The need to place all these boats that were purchased during Covid has not changed.”
Dealership acquisitions also have continued. This past year saw MarineMax purchasing C&C Boat Works in Minnesota; OneWater buying Harbor View Marine on Florida’s Gulf Coast, in addition to Taylor Marine Centers locations in Delaware and Maryland; Sagamore Blue acquiring Twin Marine, a dealership and marina in New Jersey; and Walstrom Marine buying Grand Bay Marine in the Great Lakes.
In the marine electronics space, Teledyne Technologies, the parent of Raymarine, acquired ChartWorld, which provides digital navigation software and hardware. Among parts and accessories, Correct Craft bought Indmar Marine Engines, as well as Pacer Marine Engineering, which makes wiring harnesses (a part that was hard to come by during Covid supply-chain challenges); Winnebago purchased Lithionics Battery; and United Safety, which makes safety and survival technology equipment, bought Allsalt Maritime, maker of Shoxs impact-mitigating seats.
Correct Craft’s Yeargin says the potential for future deals in some spaces might be stronger than in other areas for the rest of this year, especially with continued economic headwinds. “We’re across several segments. We’re seeing differing degrees of decline across the industry, the market in general,” he says. “Every time a company values another company, it’s basically on the present value of future cash flow. When you’re on uncertain ground, you don’t know what the future will hold for this company.”
Brand Expansion
A key motivator for quite a few recent mergers and acquisitions has been brand expansion. Joseph Visconti, CEO of Twin Vee, says his power cat company bought the monohull builder Aquasport as a way to appeal to even more buyers.
Less than a year ago, Twin Vee went public with its North Carolina-based electric-boat brand, Forza. Twin Vee then saw Tennessee-based Aquasport as complementary to both Twin Vee and Forza. The Aquasport acquisition included what Visconti says is $4 million to $5 million worth of tooling — “all in great shape” — along with a 150,000-square-foot factory and seven models from 21 to 25 feet.
“Because we were public as Twin Vee, we needed to continue to scale our growth,” Visconti says. “Twin Vee, being catamarans, is only like 6% of the market share. We did grow 100% last year, but we wanted a product that was more scalable as a public company. Aquasport just fit like peas and carrots. There was a dealer network in place. There’s an owners’ group of like 7,000 really passionate people.”
Visconti says his plan is to build out Aquasport’s line from dayboats to offshore models up to 35 or 38 feet, with center- and dual-console designs, in the next five years. He says he expects to turn out 220 Aquasport units in year one, with maybe 400 units by year two. His bigger vision is for customers to be able to order a Twin Vee catamaran or an Aquasport center console with an electric outboard produced by Forza — and he doesn’t see individual owners as the only marketplace for those types of purchases.
“We see demand increasing from the boat clubs, I think because the consumer that was looking for a $100,000 boat where the payment used to be $500, that payment, because of interest rates, is now $1,000 or more, so that family decided to go the boat-club route,” Visconti says.
At Sweden-based Nimbus Group, chief marketing officer Michael Bohm says the acquisition of EdgeWater Power Boats capped a years-long search to find a good production setup in the United States. While the EdgeWater brand is strong and will continue to exist, Bohm says, Nimbus is primarily looking to build its own brands at the EdgeWater facility and, possibly, at other U.S.-based, outsourced facilities.
“Our objective, even before the pandemic, was that we should have 40% to 60% of our production to be outsourced,” Bohm says. “We are quite used to the fact that there are good times and bad times in our business. It goes up and down. To be strong in both good times and bad times, flexibility is key.”
That flexibility likely includes acquiring U.S. dealerships, he adds. Nimbus works with about 120 dealers in Europe, including eight that it owns in Sweden, Norway and the U.K. The company is looking to add U.S. dealerships. “That is also part of the strategy from our perspective — not only to be a boatbuilder, but also to be a boat dealer,” he says. “In that arena, we are still looking to make more acquisitions. We would like to be present in what we believe are relevant boat markets for our brands.”
At Kadey-Krogen, president and CEO Tucker West says brand expansion was also top-of-mind in his thinking about the purchase of American Tugs. “There’s a ton of synergy in our brands,” he says. “They go from 36 to 43 feet, and we go from 44 to 60 feet. So that’s huge. They have no sales outlets on the East Coast; I have eight brokers up and down the coast. We have limited representation on the West Coast, and the majority of their owners are out there.”
Kadey-Krogen builds in Taiwan, while American Tugs manufactures in La Conner, Wash. The deal could create opportunities to shift some manufacturing back to the United States, West says. “Having another facility to build product is always a good thing,” he says. “I may want to ship my 44 tooling from Taiwan to La Conner to build a boat in La Conner, a Kadey-Krogen. There’s nothing that says that can’t happen.”
West also looks at the American Tugs acquisition as filling out the need to offer several hull types a potential owner in this size range might want to buy, in tandem with Kadey-Krogen’s Summit Motoryachts brand. “Now we cover all three hull forms that I consider key to the recreational market,” West says. “You have full-displacement with the Kadey-Krogen, we just added semidisplacement with the American Tugs, and we have planing with the Summits.”
Looking Ahead
Of course, it’s anybody’s guess what the general economic conditions will be in the second half of 2023, but several top executives indicate cautious optimism about continued mergers and acquisitions. Unlike in the marina space, where demand remains strong, companies in other segments are seeing varying levels of challenges that will affect — but likely not totally scuttle — valuations and deals.
“There’s a couple other companies we’re talking to, but it would have to be an opportunistic situation,” Twin Vee’s Visconti says. “We’re not going to pay a premium for an acquisition, given the headwinds in the market right now.”
He adds that in some boatbuilding segments, big pullbacks are already in play. “The really great, expensive ski boats are slowing down dramatically,” Visconti says. “The $100,000 boat, the hardworking consumer that was probably going to finance that boat, they’re slowing down. The bigger boats where people pay cash, they’re doing well, but the data shows the industry dropping by about 30%.”
Nimbus Group’s Bohm says he sees a mixed bag industrywide for the next six months to a year. In some areas, mergers and acquisitions might accelerate, but the overall picture is fragmented. “We see continuous, good growth for the larger-boat segments, while we believe it will be some tough months or even years in the small-boat markets,” he says.
Yeargin says there seems to be a disconnect between some company owners looking to sell on the strength of pandemic-era sales and would-be buyers looking ahead at less-rosy sales projections. “The sellers will say, ‘We sold a thousand boats last year,’ but if the market is down 20%, buyers will know they’re only going to sell 800 next year,” Yeargin says. “I think the peak to sell was probably last October, November, December. We’ve seen a decline in the market this year. It’s not catastrophic, but it’s big enough that it’s going to impact valuations.”
Similarly, Kadey-Krogen’s West says he doesn’t foresee the economy slowing acquisitions, but only if sellers adjust their thinking on pricing. Kadey-Krogen itself won’t be hunting for more deals in the next year, he adds, “but if there are opportunities that can improve the overall group, we’re happy to look at them.”
His primary focus, he says, is still on inflation, the supply chain and hiring to run the current brands. “It’s a huge challenge right now with engines, stabilizers, hydraulics — I could be delivering double the boats if I could get all the parts and pieces,” West says. “The prices are rising at a rate that’s so fast right now, we’re trying to cover ourselves. We focus on that on a daily basis, but I don’t see that as an impediment to buying another company.”
This article was originally published in the August 2023 issue.
