Brunswick chairman and CEO Mark Schwabero didn’t say whether the company had considered buying Power Products when it was sold to San Francisco-based private equity firm Genstar Capital in December 2016, but he did say that the company has “learned a lot more on the M&A side over the years as we’ve done more transactions.”
Speaking on a call to discuss the agreement to acquire Power Products marine and mobile businesses for $910 million on Friday, Schwabero said there were still more opportunities to continue expanding in the parts and accessories part of the industry.
“Global distribution on P&A is still very fragmented, so there is an opportunity to do some consolidation there,” Schwabero said. “These past six months been really eventful, and I would say they’ve been transformational for Brunswick.”
Brunswick also announced last week that it would take Sea Ray off the market, and that it would discontinue Sea Ray’s yacht and sport yacht segments.
The acquisition was one of the largest in marine history from a dollar standpoint, said Michael Swartz, financial analyst for SunTrust Robinson Humphrey.
“Admittedly, on the surface, the purchase price — 3.9 times sales, 15.6 times estimated trailing 12 months EBITDA — appears a bit steep,” said Swartz in a report issued Friday following the call. “However, when adjusted for the $50 million net present value in tax benefits expected and aforementioned synergies, the valuation actually approaches 10 times EBITDA.
“We view this as particularly compelling for a higher-growth/margin business with an asset-light structure (i.e., attractive free cash flow generation) and a less economically-sensitive revenue stream,” said Swartz. “Keep in mind that several recently announced boat manufacturer acquisitions with slower growth and lower margins were transacted in the 10 to 12 times range.”