Marine Business Consolidation Quickens its Pace

The boating business is changing fast and at an accelerated pace we haven’t seen in the past 50 years. Boat brands, boat dealerships, marine-equipment manufacturers and marinas are being bought up and consolidated in what is the biggest restructuring of this U.S. industry since WWII. The Great Recession, low-interest rates, the entrance of private equity and venture capital and the retirement of many small-business owners has created a perfect storm for change. But what will all of this mean for the average boater? Will the quality of products, services and the whole boating experience be improved or will boaters be at the mercy of the company store? 

Consolidation is the Name of the Game

Private equity and venture capital firms have been buying boat companies at a faster pace and if their timing is right — or lucky — they can make debt payments then take the companies public to pay off the loans. With recapitalization, the companies can then buy other brands and grow.

Public companies with stockholders who want their investment growing at rates competitive with other industries, and at a premium for their risk of exposure to a cyclical industry, will demand growing earnings. In a market that has been shrinking in all but the wakeboat and jet-boat categories, with most of the traditionally lucrative categories in steep decline or stagnant, the fastest and easiest way to grow is by acquisition.  For this reason, we expect boat brands and boat dealerships to continue consolidation.

Change in Boat Sales Over the Last 18 Years

Boat Brand Consolidation

For example, Black Canyon Capital and Horizon Holdings Acquired Malibu Boats in 2006. Then, in 2014 it went public, paid off debt and started acquiring some blue-chip boat brands including Cobalt in 2017, Pursuit in 2018 and Maverick Boat Group in January 2021, which builds the Cobia, Pathfinder and Hewes brands. In a matter of seven years, eight brands (one created organically, Axis) were consolidated under one corporate umbrella.   

Reported sales in fiscal 2021 were $927 million with 8,185 units sold.

In 2007 two private equity firms, one affiliated with Roger Penske, bought MasterCraft. During the depths of the Great Recession in 2010, the company was recapitalized by Wayzata Investment Partners then taken public in 2015, raising $100 million. MasterCraft then bought NauticStar in 2017, Crest Pontoons in 2018 and started Aviara in 2019. In 2020, to ramp up production for the successful Aviara line, the company bought the Merritt Island, FL, factory that had been used by many boat brands over the years.  

Reported MasterCraft net sales for fiscal 2021 were $525.8 million, up 45% from the year before.  

Boat Dealer Consolidation

MarineMax started out as a roll-up of five large Sea Ray dealerships when it went public in 1998. Since that time, it has regularly bought many of the largest boat dealerships around the country, most recently Skipper Buds in the Midwest. It now has more than 100 locations worldwide, including 77 retail dealership locations, which includes 31 marinas or storage operations.

In 2019 MarineMax bought Northrop & Johnson to enter the megayacht market, then in 2020 bought Fraser Yachts to expand its large motoryacht business and to expand the high end of its chartering business.

Vertical Integration. Over the last several years, MarineMax has struck exclusive distribution deals with Galeon Yachts and Aquila Catamarans and this year it bought Cruisers Yachts and Intrepid Powerboats. With the purchase of these boat companies, it has consolidated and vertically integrated — building the boats it sells at its dealerships, puts in its slips and dry-stack storage, then sells through its brokerage division when the owners are done with them. When its clients are between boats, it can sell them charters on bareboats and crewed boats.  

Recently, MarineMax announced annual sales of $2 billion, up from $1.5 billion the year before.

OneWater was formed in 2014 when Atlanta-based Singleton Marine announced a merger with Florida-based Legendary Marine, then it quickly rolled up two other dealerships. Now it has about 20 dealerships in its portfolio and 70 store locations. The company sells new and used boats and has a special facility designed to sell used boats overseas. Its stores have franchises for boats as small as Barletta pontoon boats and as large as Sunseeker motoryachts. In between it has such brands as Regal, Chaparral, World Cat, Pursuit, Parker, Tiara and many others. 

OneWater has announced revenue of $1.3 billion for 2021, up 20% from the previous year.

Enhanced Owner Experience

Most industry professionals and consumers would agree that in the boat business, the dealer has been the weak link in the consumer experience.  Indeed, 20 years ago the NMMA even instituted a “Certified Dealer” program to improve the consumer experience. Typically, this was because of undercapitalization, lack of trained personnel and a limited view by the dealership owner of what his obligations were to the consumer. 

While there are many fine independent dealers, in fact, some of the best are independent, dealer consolidation clearly has had a positive impact on improving the consumer experience, as best practices are shared, automotive-type CSI grading instituted and professional corporate culture and infrastructure combine to focus on the customer.

Brunswick Corp. Stands Alone

Brunswick Corp. is much more than a vertically-integrated consolidator, it is more of a whole boating ecosystem in itself. In addition to Mercury outboards, MerCruiser sterndrives and Mercury Racing, it also owns no fewer than 16 boat companies, led by Sea Ray, Boston Whaler, Bayliner and more, including four in the aluminum fishing-boat business. 

Its parts and accessories division is made up of 18 different companies making equipment from sophisticated electrical control systems for large yachts to trim tabs and bilge pumps for small ones and even life jackets for dogs. Last year it bought the country’s largest boat club, creating a remarkable symbiotic relationship that supplies the club with boats, engines — and with this year’s $1 billion dollar acquisition of the electronics conglomerate Navico — Brunswick can now supply those boats with its own electronic and navigation components. It even has a division that buys and refurbishes its old boats for resale.

Brunswick supplies parts to most of its competitors in addition to its 16 in-house boat brands. It also owns mail-order and wholesale distribution companies. In 2020, the company announced that future plans call it to stay strictly in the marine business. Gross sales for Brunswick were more than $4 billion in 2020.

Marina Consolidation

A 2013 Internal Revenue Service decision determined that boat slips within a marina that are leased to boat owners constitute a real-estate asset for the purpose of real-estate investment trust rules. This ruling proved to be a game-changer for tax reasons. 

Coincidentally, in the 2000s, many owners of marinas around the country were people reaching retirement age and were looking for a profitable exit strategy. These two factors made for a perfect opportunity for both sellers and buyers — and consolidation.

In 2016 Safe Harbor was formed with private capital, acquired marina portfolios with 31 marinas in 12 states, giving it a good start in marina consolidation. In 2017 Safe Harbor bought the Brewers Marinas in the northeast and doubled its marinas to 63. In 2018, it added the Charleston City Marina and its famous mega dock to the portfolio, followed in 2019 by New England Boatworks and the famous Newport Shipyard, which is home to dozens of megayachts in the summer. In 2020, it bought Sun Harbor marinas giving it over 100 marinas in 22 states.

Today, Safe Harbor continues to be actively seeking more marinas, but not just any marinas.  The company’s standards are high and its commitment to improving properties and providing a rewarding experience for its customers is exemplary.

Suntex Marinas was started in 2015 with $200 million of equity commitments and $500 million of buying power and has grown rapidly over the last five years. A couple of years ago it bought Bahia Mar in Ft. Lauderdale, home of the Fort Lauderdale International Boat Show, and the Miami Marina. More recently it bought Las Olas Marina and Faro Blanco in the Florida Keys. This year it bought 11 Loggerhead Marinas, making it the largest marina owner in Florida. Currently, it has 45 marinas in both freshwater and saltwater locations in 11 states.

It is clear marina consolidation has improved marine infrastructure, safety and overall boater experience. In some cases, the improvement is night and day. The costs of improving a rundown marina in a great location are staggering. That’s why only large companies with access to a huge amount of capital can take on the job.

The result is that in many cases concrete docks are installed with the latest electrical fixtures, swimming pools, improved showers and restrooms. Sometimes even snack bars and cocktail lounges are added.

BoatTEST’s Sovereign Boat Club has two of its boats in an IGY marina in St. Pete.  This marina consolidator owns 26 first-class marinas in the U.S., Caribbean, Latin America and in Europe. After buying the Maximo Marina in St. Pete, IGY spent millions dredging, installing concrete dock, hurricane-resistant covers and a large dry stack facility. We can attest to the high quality of the facility and the staff’s dedication to a first-rate owner experience.

Overall, it looks to us as if consolidation in the marine industry is very much a good thing — and inevitable. Boat owners will now have a better experience buying, maintaining and operating their vessels.  

Be sure to visit BoatTEST’s listing and prices of publicly-owned companies in the marine business…