It was only a year ago that Soundings Trade Only last interviewed Rec Boat Holdings president Roch Lambert for a Q&A, but at that time the company was still owned by California-based private equity firm Platinum Equity Group. Rec Boat was one of several former Genmar brands Platinum had bought out of bankruptcy for $70 million in 2010. Today everything is different for Rec Boat, which builds Four Winns, Glastron, Scarab and Wellcraft boats.
In June, the Beneteau Group bought Rec Boat — which has revenue of about $150 million and employs 475. No sale price was disclosed, but Beneteau CFO Patrick Guilloux says the medium-term cost of the acquisition, which includes the investment of bringing RBH brands to Europe and Beneteau brands to North America during the next four or five years, should be less than $100 million.
The acquisition positions Beneteau as one of the largest powerboat players in the world and gives it instant distribution and manufacturing access to the North American market it covets. At the same time, it gives Rec Boat Holdings brands a chance to establish themselves in European markets, where Beneteau is a huge player. The sale also marks perhaps the first turnaround the industry has seen of a post-recession private equity acquisition or investment firm infusion.
We spent some time talking with Lambert as he traveled to Chicago’s O’Hare International Airport to catch a flight to the Paris International Boat Show, where all four Rec Boat brands were to have a presence for the first time.
Q: You’re on your way to Paris for the show. How does the upcoming show season look, and how were your early indications in Fort Lauderdale?
A: We introduced two new boats, which I’m sure you know. We modified one of our large cruisers, which is the Vista 45, and essentially built what we consider to be a new category. So it’s a 45-foot runabout with some cruiser amenities. That was very well received, interestingly, by everyone in the industry. The press had lots of good comments, [and we got] very good feedback from consumers, and amazingly, a lot of very interesting comments from our peers and manufacturers. So our competitors were looking at the model and kind of thinking, ‘Why have we not thought about that before?’ Because there has been, as you know, pretty significant increased demand for a bigger bowrider. That was why we came out with the 35-foot bowrider that has a cabin in it. This 45 is sort of a leap ahead of everything that’s on the market today in terms of offering the amenities of a bowrider, so there’s actually space in the bow. We improved the functionality of the cruiser because most of them, when they’re up and running, you can’t really use the deck. We made it very usable, comfortable and safe and created a social environment, which is what consumers seem to be looking for.
The 35 is a boat that we’ve had in the works for a little over a year now. We were not first to market with that one, unfortunately, but we believe we’ve learned from everything out there and made it better. We have one of the largest cabins in that range and typical bowrider amenities that are among the best in class.
Those two boats turned a lot of heads and got a lot of attention. We retailed a few units in the process, which is always important, so we’re quite pumped right now for the upcoming boat show season. We believe we’re going to get our fair share of the action. Boat shows in the fall in Europe were very good, so I’m heading into Paris with a positive attitude. We have a bunch of new dealers that we signed as a result of the Beneteau deal that will be supporting the brands. Right now everything looks pretty bright. It’s not easy, it’s not simple, the segment’s not booming, but I think we’re getting a good share of what’s happening right now.
Q: You mentioned that you had good fall boat shows in Europe, yet everything we’re hearing here is that the markets there are really tough. Can you tell me what you’re seeing?
A: Overall, I don’t think the market is coming back there. I think calling it flat may be actually a little optimistic. Unfortunately in this industry we don’t have a lot of data to really base our judgments on. It appears to us that it’s probably a flat to slightly declining market still, but we’re getting more than our fair share of it because of what we announced in June.
Interest has increased because we were acquired by the largest player in the industry over there, and the largest by a long distance. So we’ve had good boat shows in pretty much all the countries — France, Germany. I’m not going to tell you things are booming, but we certainly feel good about the benefits we’ve gained through the strategic moves we’ve made in recent months. We have pretty high expectations for the Paris show. It is the first time ever that we are going to display our four brands in the show. We’ll have Four Winns, Glastron, Scarab and Wellcraft all displayed together in one booth. Last year we only had Four Winns on display. So it’s a pretty significant increase over there, augmented by the fact that we’ve added a pretty significant number of dealers.
Q: We spoke a bit about how the Beneteau acquisition came about when it happened, but can you touch on that again? I think it’s been particularly interesting to the industry since I believe it was the first major turnaround from a private equity firm that bought after the recession.
A: Yeah, you may be right. We had talked about the synergies that we, and when I say we, now I mean as Group Beneteau, that we saw in the acquisition. Certainly there are distribution synergies that are very strong for us and will help us grow our market outside North America. It’s a phenomenal presence that they have with their brands. The No. 1 synergy we had talked about was leveraging our American brands with their international network, and that’s going very well. We’ve had over 100 of their dealers ask to take on our brand. We’re in the process of signing those dealers. I’m not going to say we’ve signed 100. That’s not the case. There’s going to be some fallout, for sure, but there’s been a very high level of interest for our brand within their network.
And the other one was for our network to take on their Jeanneau or Beneteau brands here in North America, which I will say has probably not been as successful. But although the count was lower, we’ve been very successful at convincing — which didn’t require lot of work, frankly — most of our key dealers to take on one of the Beneteau brands. That’s still in the works and will be in the months ahead.
Right now we’re working a lot on operational synergies, costs of materials, exchanging our best practices with engineering. Julie [Johnson, director of marketing at Rec Boat Holdings] has been talking with the people in marketing to see what we can do at boat shows to consolidate spaces.
Q: So for European dealers selling Rec Boat Holdings brands, and your dealers here selling Beneteau and Jeanneau brands — those units are being shipped right now?
A: Yes. We have six dealers in France alone that have already received boats that we’ll be supporting the display of in Paris. Just to give you relative numbers, we have five dealers that were there a year ago and we have 11 or 12 this year. That goes through for Germany, Italy. We had nothing left in Italy. Believe it or not, we did not have one distribution point, and now we’re rebuilding the network, using the network they have in place. All of that is shaping up right now at a pace that we have to realistically be able to sustain production. If those people want to place an order for some pretty big boats, I will tell you we’ve had pretty decent success with our bigger units this fall. Right now on some of the lines, we’re four months out. If someone says ‘I’d like to have the next model boat XYZ,’ in some cases right now we’re talking about production in April, and if you’re in Europe that means you won’t see a boat until the end of May, early June. We’re going to run into some of those challenges as we go along. Those are challenges we’re more than happy to take at this point. It’s a process. It’s not something that you just flip a switch and it all happens overnight, but I like the way things are progressing.
Q: January is always our “crystal ball” issue, so I’m obligated to ask you to look into yours. Private equity dollars, cash infusions, companies merging — do you think we’ll see more of that moving forward? And knowing how fragmented boatbuilding has traditionally been, do you think it’s a good thing?
A: I don’t know that we’re going to see lot more transactions in this space driven by a growing presence of private equity or any other kind of investment funds. If I were a betting man, I’d say it’s probably going to stabilize where it’s at today. You have a limited number of companies that have the size to be attractive for those firms. Most of those that would be considered targets are already involved with PE or were already involved with private equity firms in the past.
A lot of the larger players on the towboat side — MasterCraft, Malibu — are owned by PE. In the case of MasterCraft, it’s been through a bunch of different rounds. I don’t know that we’ll see that expand. There can always be a deal here or there, but I’d be surprised if that became a quote, unquote trend.
Q: Some of these investors would probably be looking to sell moving forward. Will there be more acquisition from other boatbuilders? Is it necessary?
A: I think that’s a plausible scenario. I don’t think there’s going to be a whole lot. As an inside operator, I have a pretty good sense of why, but for some reason the larger boat manufacturers have always had a harder time than smaller ones. If you look at their financial performances over the last couple of years, they’ve had some challenges. For some reason, the big players have appeared to have more challenges than the smaller ones. Whether it’s because they can’t react fast enough — again, I have my own opinions about some of that — so I don’t know if it’s an appealing model to say, ‘Where everybody else has failed, I’m going to be successful.’ And you could challenge me and say, ‘Well, you’re one of them,’ and rightfully so. I will tell you, though, without giving you all the inside information, that we’ve proven our business model has been a pretty successful one with what we recently accomplished. I think we’ve put in place a pretty decent discipline of execution. I think we’ve had good vision in putting the plan together, and that’s what made it attractive for the Beneteau Group.
Q: Isn’t Beneteau one of the two largest at this point?
A: It’s probably becoming a pretty close race. But we do that in different ways, right, because Beneteau’s only in the fiberglass business. We have a sailboat business that’s very significant to the company, but we don’t play at all in the aluminum business right now. If you look at unit count, Brunswick is by far a bigger aluminum manufacturer than fiberglass. If you look at revenue numbers, you’re certainly looking at two companies that stand out from the rest of the crowd.
Q: So that said, it’s funny to hear you say big business models don’t work out too well. Why will this marriage be more successful?
A: Fundamentally, there’s a ton of complementarity between our businesses, and there was literally no overlap. They had no presence from a manufacturing standpoint in North America. We had no presence outside of North America. So right there you have opportunities to leverage physical assets. We didn’t have to sit down and say, ‘OK, what facilities are we going to shut down in Brazil?’ because we only have one combined. They didn’t say, ‘We’re going to acquire RBH and shut down another facility we have in North America.’ They only have one in South Carolina, and it’s focused on sailboats and there’s no intention of changing that. When Brunswick went through its series of acquisitions a few years ago, they had aluminum plants everywhere. They had fiberglass in different parts of the country, so they had a very different debate about how do you consolidate all that. We did not face that complexity. We’re actually just adding pillars to a foundation that was very strong individually. By putting this together, we just have synergies to leverage. We won’t have to debate and rationalize what we have. We have the opportunity to just leverage it better. And you do that, of course, with the consolidation of the network. Again, they had a very strong presence outside North America. They had a growing presence inside North America, but it was not mature yet, so we bring that to the table. As we looked at the acquisition part of making the deal, we never had the debate about how we were going to manage the contraction we were going to go through. It was not a topic. So it’s all upside for both of us. That’s why this was such an obvious marriage. I’m still surprised no one saw it coming. I have people say to me, “Well that was a huge surprise.” When I joined Platinum in 2010, I had already entertained a bunch of conversations with the Beneteau Group. It was obvious to me that was the marriage that needed to take place. I never went anywhere else. I never talked to anybody else.
Q: The Beneteau Group is taking market share in a shrinking market. And I feel like we’re still seeing manufacturers get bought out and receive investments, but none are really going away. I recently spoke to an American boatbuilder who was seeking financial backing because the competition has gotten so fierce. Will that be necessary, or will the industry need to see some manufacturing fallout to be sustainable?
A: I think everyone would agree with me that there is still overcapacity in this industry. If some brands disappear, it’s going to be better for everybody’s that left — dealers and builders, in my opinion. Having too much capacity leads to behaviors that are not financially reasonable for all the players. Is that going to happen? I don’t know. Boatbuilders and dealers have shown themselves to be pretty resilient in tough times. I mean, this has been a tough, tough downsize for many segments in the industry, and yet there’s been little to no reduction in the capacity and the number of brands that are offered. I wouldn’t base our business plan on a lot of brands going away, but I believe, and the track record is showing, that the group is gaining market share in a lot of the segments that it’s playing in right now.
A lot of it is the product, but we all believe that distribution plays a very important role. Offering a broad portfolio of products, as we now do as a group, I believe, and from conversations we’ve had with the dealers, it positions us to be a good, strong partner. If you’re a dealer today and you have to choose between a company that’s under the umbrella of our company, for example, or the brand of a small company and some of the uncertainties there — Beneteau’s been around for 130 years. I don’t know that it will be around in 130 more, but I’m willing to bet a lot of money it will be here in 25 to 30. I think that really positions us well for successful expansion from a distribution standpoint.
Q: You’ve mentioned distribution and expansion. Can you quantify that?
A: I’m not going to give specific numbers because it’s a bit of a moving target, but a significant portion of their non-American network has shown a lot of interest. One of the things you need to understand is, Beneteau was essentially exclusive in their network outside North America. If you were a Beneteau or a Jeanneau dealer, you were not allowed to carry any other brand in your store or there were some limitations. So by them saying, ‘Here’s four brands we now allow you guys to carry,’ that was a huge expansion opportunity for that network. Our level of interest was raised really quickly and with good success. We have signed most of their larger dealers in Europe already, and that covers 12 to 15 countries — Spain, Italy, France, Germany, Turkey, U.K. We’ve had dealers coming on board from just about every country in Europe.
Here in North America, it’s the same thing. We’ve gone to the bulk of our larger dealers and displayed the opportunity for them. In Canada, I think all of our dealers that are very significant for the RBH business have all signed up for one of the two Beneteau or Jeanneau brands. This is a huge opportunity for these guys. The Boat Warehouse in Kingston, Ontario, has taken on Prestige as a line. I think if you talk to the owner it’s really exciting because he grows his business without having to deal with a different organization. He knows us; he knows how we do business. Dave’s been a phenomenal dealer of ours with Four Winns, Glastron and Wellcraft. Maple City Marine in Chatham, Ontario. Rob went from having a bunch of competitive brands to ours to essentially being almost exclusive on the fiberglass side with the exception of MasterCraft. We’re having conversations with him to take on some of the Beneteau brands. He has a high level of interest. So those are just examples. In our conversations, you can see the excitement because they see increased opportunities just by leveraging a relationship that’s very well established right now. Trust is a very important element in our business dealings, so the trust is already there. To say ‘I’m going to take one more brand of what you guys do’ is a very easy decision to make. Those things will pay dividends. We strengthen our network and make them more loyal to our company. That’s what we’re banking on.
Q: Where are some areas of the world that Rec Boat brands sees opportunities for growth? We’ve talked some about Europe. Where are some emerging markets for you?
A: They have a stronger presence than we do in Asia. Europe is the second-largest boating market in the world after North America. For us, the focus has been on Europe. The RBH brands have an unbelievable presence in certain areas of Egypt and Beneteau had essentially no presence there, so our Egyptian dealer had become a Beneteau dealer, and we’ll see how it works out. There are, let’s be honest, few real emerging markets. Everybody talks about China. China has potential. I personally don’t think it’s going to be overnight. I think it’s going to be a long-term investment. The Beneteau guys have great traction there, but the market has softened a little bit in recent times. We have had, with the RBH brand, a pretty significant amount of success. We have, I think, three dealers right now, and we’re moving a few tens of units a year in China, but I don’t want to invest millions there. I don’t think the market’s as mature. I don’t think the culture is ready for what we’re trying to implement there. When it comes, it may come in big numbers, but it’s going to be a gradual process for a little while. It’s not like we’re discovering countries around the world that should get into boating. We’re a mature market just about anywhere. With the exception of China, I think the rest of the world should be considered a mature market from a marine perspective.
We have a very good presence in Australia. If you take a single country, after the U.S. and Canada, Australia is, I think, our No. 3 in terms of unit volume. I couldn’t tell you for instance that they’re going to take us to Israel and give us a great presence there. We already had a presence there. They pretty much have a presence everywhere. It’s not like we’re unearthing new markets. It’s jut developing and expanding in those areas where we already have markets. Beneteau was already a very global brand. I know that in North America, Beneteau and Jeanneau were not necessarily well known, but both of those brands have had a global presence for a number of years, including North America. If you dig into their financial statements, you’ll see the numbers they turn in North America are pretty darn impressive. When you talk to major distribution players, they very well know brands like Beneteau, Prestige, Jeanneau, Monte Carlo. They realize those brands are in to stay, and they are very aggressive and gaining a lot of market share with great products.
Q: What’s it like being a company with financials out there for everyone to see? Is it an asset for dealers, with transparency, or does it put more pressure on you?
A: Listen, the pressure’s always there, whether you want it there or not. The easy answer is to say that when things are going well, you want dealers to know. When things are not going so well, you don’t want them to know.
Right now we’re in a decent situation. You always want to do better. If I’m an RBH dealer, and that’s essentially what we heard at the dealer meeting in August, to go from private equity ownership to Beneteau [is good]. We were absolutely blessed with the Platinum Equity team because they never looked at this as, let’s make it happen quick and make a quick buck, no matter what happens to it afterward. That was never their attitude. They invested a lot more, frankly, than any other private equity firm has done during the time that we were in, where there was more uncertainty than certainty. They allowed us to take the business to the next level. But I know some dealers were uncomfortable with the fact that, OK, we know we’re going to change owners again; we just don’t know when and we don’t know who it’s going to be. It could be a bad decision for me as a dealer. It turns out I strongly believe it was a phenomenal decision for the dealer network. Now we have continuity. Now we have longevity. This is a company that’s been in the marine business for 130 years. I can tell you that in the boardroom, the passion I see for the industry is absolutely unmatched. Those people are really sailors. They have it in their blood, from the owner of this company to all of the employees. I think it’s reassuring for the network to know we’ve gone down that road. We recently announced the financial performance of the company. They made money again last year. I think all of that was positive. So transparency plays into your hands in that scenario.
Q: Anything exciting on the horizon that you can actually talk about?
A: Our hands are full working on all those synergies. We’re like everybody else, getting ready for boat shows. On the RBH side, I’ve put a lot more emphasis on dealer training this year. We introduced a long list of new boats this fall. I’m to a point where I’m looking forward to slowing down a little bit, but our next emphasis with RBH is going to be Wellcraft. We have a phenomenal asset there. I’m not going to say it was dormant, but it was not leveraged as hard as the other brands were. We’re at the point where we’re going to make a pretty significant splash. In the next 12, 16 months, you’re going to see the image of the Wellcraft brand being rebuilt. We’re pretty excited about that. We’re hopeful boat shows will be positive. We feel good about it, though there are still some unknowns around the sterndrive segment, but we hope they’ll dissipate in the months ahead.
This article originally appeared in the January 2015 issue.