Denison Being Purchased By OneWater Marine

Safe Harbor is also buying Bluewater Yacht Sales/Service (Hampton, Wanchese, Annapolis) and marina (whom previously partnered with Jarrett Bay). They think it will help with service up and down the coast.

You can't even get the parts department on the phone at one water in ft. lauderdale and when you leave a message nobody EVER returns a phone call.

Definitely an industry gone wild. For decades the one major player was Marine Max, primarily a boat dealership and marinas very secondary. More recently, they've formed alliances with builders and acquired brokers of large yachts.

Then there was on the marinas side, Marinas International which failed during 2008-09 recession and operators like Westrec. But Marinas International was restarted as Safe Harbor and they went wild acquiring marinas until they were acquired by Sun Communities. Meanwhile right down the street from them (literally so in Dallas) was Suntex and they grew and they they acquired Westrec and suddenly every marina was in a bidding war. However, these two groups, especially Safe Harbor, didn't stop at marinas. Suddenly it was major boatyards like Rybovich, Roscioli, Jarrett Bay.

Then who to target Marine Max. Well, there were some regionals, many acquired by Marine Max and one family company, Singleton Marine, held out. They become OneWater Marine Group. One change in this entire picture though is all these companies are now publicly traded and generally have strong financing. OneWater is now very nearly the same size as Marine Max and the targeting is obvious with 6 of the 11 executives having worked for Marine Max. But like Safe Harbor and Suntex and Marine Max, they're branching out. They've acquired T-H Marine Supplies and Denison and Yakgear and JIF Marine.

One thing to recognize is that all these are aggressive public companies intending to continue to grow. Safe Harbor's pockets were emptying so they were acquired by deeper pockets in Sun. Suntex wanted to acquire more so they got a sizable investment from equity capital. OneWater has board members strong in investment banking.

And let's not overlook the largest manufacturer of boats in the US, Bass Pro and subsidiary White River Marine Group. Not just Tracker today, but first acquired Ranger and related brands and Mako and now Hatteras and is there a next?

The thing is that the boating industry in the US, from Marinas to builders to dealers has undergone a huge change in the last few years and is likely to change much more. We're talking aggressive acquisition companies and old names we were surprised to see acquired. It is somewhat like auto consolidation in that few of the acquisitions are all cash, but most involve a sizable percentage of stock. Someone pointed out the auto dealership service departments. Well, OneWater is well aware as Parts, Accessories, Repairs and Maintenance are only 11% of Revenues but are 17% of Gross Profit. Finance and Insurance is only 3% of Revenues but 9% of Gross Profit.

Last, none of these companies have shown they stay within the lines, but all venture to anything related that they see might fit. Now, when we come off the high the industry has been riding, I'm not sure where any of them are left. I imagine some fine and some scrambling for more money. Regardless, the industry has changed but it's also much the same. For the hundreds of dealerships Marine Max and OneWater own combined there are still thousands they don't own. For the hundreds of marinas owned and operated by Safe Harbor and Suntex, there are still thousands they don't own or operate.

It's easy to write a check, the tough part is everyday operations. These "financial wizards" have proven time and again that they will fail miserably at the daily grind. These companies try to run small outfits like Walmart. The employees won't put up with it and neither will the customers. Market softens and company starts burning cash. The wizards unload at fire sale price and make excuses all the way to their next victim.

Never a great idea to buy highly cyclical businesses at or near the peak of a strong market. Especially businesses like boat yards that provide complex processes requiring intricate scheduling and intense management. It will be interesting to see how One Water and Suntex fare during the next downturn in the boat/yacht market. Private equity firms flush with cash are overpaying for assets in many industries.

Don't overlook that the predecessor of Safe Harbor failed during the last recession, Marinas International. Same location, same people. Same initial marinas. Safe Harbor now owned by Sun Communities.

My fear is that as things turn, they'll all start supporting the businesses more poorly and service will decline.

Still, I'd rather trust a deposit made to OneWater than one to Rick Obey. As critical as I am of Marine Max and their poor service, I'm not concerned about the safety of my down payment with them as I might be with Mom and Pop's Boat Sales. Even on marinas, Suntex and Safe Harbor are more capable of funding maintenance and upgrades than Small Town Small Marina was.

The reality is we won't learn about the "character" of these companies until hard times hit them. Then we'll find out what they are made of.