By Greg Gerber
Editor, RV Daily Report
It’s an absolutely gorgeous fall day here in my hometown of Madison, Wis., with blue skies and mild temperatures. So why do I have this unease in the pit of my stomach?
It could be the news released Saturday that Dicor had been acquired by Airxcel followed by news today that Winnebago had acquired Grand Design. The consolidation of the RV industry continues unabated.
Once the Winnebago deal goes through, only three companies – Thor Industries, Forest River and Winnebago – will control more than 80 percent of all RV manufacturing. That means dealers and consumers have fewer choices as to companies with which they can do business.
Earlier this summer, when I last talked with Don Clark, Grand Design’s president, he was super excited about the future for his company – and he should be. The firm, which started with a logo and an artist’s conception of a fifth wheel just four years ago, was already a major player in the RV industry.
Today, it sold for $500 million, plus Winnebago stock.
I was left scratching my head as to why this company would want to sell out to a competitor, but then I read the press release. I had forgotten that Grand Design had jumped in bed with an equity company, Summit Partners.
Everyone gets super excited when their companies attract equity investment. But the huge wads of money presented often blinds borrowers to the reality that their dreams, hopes, plans and vision don’t matter one bit more than how much money the equity “partners” can get in return on their investment.
It’s like taking your dream girl to prom. You’re excited that she said “yes” to the invitation, so you invest a lot of money for fancy clothes and dinner out, but are left feeling dejected with wilting flowers when she gets a bigger and better deal and dumps you at the dance for the captain of the football team.
Undoubtedly, Clark and his business partners, Ron and Bill Fenech, made off like bandits in the night with a purchase price equal to seven times earnings. They don’t get to keep all the money, of course, because a substantial amount will be siphoned off by their equity partners so they can repeat the schmooze, wine, dine, deal and dump process with another firm.
But, Clark and the Fenechs will likely make substantially more than the Grand Design employees who were inspired by the brilliance of their leaders’ vision to make the company a truly innovative firm in an industry that prides itself on its me-too business models.
In a letter to employees and customers sent out earlier today, the Grand Design leadership noted, “recent big company acquisitions prompted us to re-evaluate our long-term plans. Some of the larger RV companies were not only acquiring smaller companies, but suppliers and vendors as well.”
That feeds right into my RV Industry Death Spiral editorial series that I published a few months ago, which can be read by clicking here.
The leadership team explained that Winnebago was an iconic brand with “similar” – not the same – core business values and culture. They noted that combining forces now will provide “the resources and capital to stand tall and give Grand Design added security to weather even the toughest of economic conditions.”
It’s nice to know that leaders the likes of Clark and the Fenechs agree with me that, thanks to consolidation, the next economic correction will greatly impact the industry for the worst. It also signals to me that the equity group also sees writing on the wall that economic storm clouds are ahead and felt it best to dump their RV industry investment before its value was seriously diminished.
I guess if Grand Design had to align with a company to remain strong and competitive, Winnebago Industries is the best choice as Winnebago is an iconic company that does produce some of the better quality, affordable motorhomes.
The saddest part about these acquisitions is that the deals often come with handcuffs. In exchange for a handsome payout, senior executives are often locked into long-term non-compete agreements, which sideline creative entrepreneurs for extended periods.
In this case, Clark retains his leadership position as president of Grand Design and becomes a vice president of Winnebago Industries. Dicor’s Gregg Fore, another truly innovative and outspoken industry leader, emailed me today saying he was “still here leading the troops for the foreseeable future.”
However, the Fenech brothers, who are very much like Midas in that everything they touch seems to turn to gold, were sidelined for three years following their sale of Keystone to Thor Industries. During that time off, they dreamed up Grand Design, which they described as a “different way of doing business.”
But, this time, they will serve as “strategic advisors” to Winnebago and their roles are still undefined. In other words, they’ll be paid to golf.
Better to keep them busy on a golf course lest they come up with a new idea of an RV manufacturing firm that turns the industry on its ear – again — and embarrasses long-standing RV makers with better quality, fairer dealer agreements and superior customer support.
If the RV Industry Association really wants to boost attendance at this year’s National RV Trade Show in Louisville, they should just cut to the quick and set up an NFL-style draft where every remaining independent RV dealership, supplier and manufacturer is put up for bid.
The rest of the industry could gather in front of the stage to munch on hors d’oeuvres and sip adult beverages while the powerbrokers work behind-the-scenes deals before stepping to the microphone to announce the next acquisition.
After one full day of trading, the RV industry would know which teams were firmly established rather than delaying the inevitable via a steady drip of every other week acquisition announcements.