New (majority) owners for Princess Yachts!

[dustywings]

Sky News report KPS Capital Partners is to acquire a controlling stake in the Plymouth-based luxury yacht builder Princess,


American fund KPS sets sail with purchase of British yacht-builder Princess

 

[davidej]

I have grave doubts whether these hedge funds/ private equity are really good for a business in the long term. Just look at the travails of Oyster Yachts.

 

[PowerYachtBlog]

I have grave doubts whether these hedge funds/ private equity are really good for a business in the long term. Just look at the travails of Oyster Yachts.

I agree 1000%.

Or look more in the past to those at Fairline, Sealine, Ferretti Group, Hatteras, Cabo etc etc

 

[Portofino]

The real estate redevelopment opportunities look particularly tasty imho .
The brand is transportable to where its cheaper to manufacture.

 

[Parabolica]

The real estate redevelopment opportunities look particularly tasty imho .
The brand is transportable to where its cheaper to manufacture.

i don’t agree. They’ve already announced the building of a new facility in Plymouth. it would be foolish and fiercely expensive to try and move a brand such as Princess, elsewhere. Far too many people involved. That said, it would be possible to set up mirror facilities but then there is simply not enough money in boats to duplicate the tooling and production facilities plus the unit volumes are simply too low to make a case for it also.
If the company had failed and everything came for buttons (such as Sealine’s situation back in 2013), then yes, it might make sense but as it is currently, no. And their due diligence will have shown this i’m sure.

But i do share the fears of others, that a private equity house is not the best owner for a premium UK boatbuilding brand. It wasn’t for Sunseeker, it wasn’t for Fairline and it wasn’t for Oyster. I do however hope that they prove me very wrong.

 

[PowerYachtBlog]

But i do share the fears of others, that a private equity house is not the best owner for a premium UK boatbuilding brand. It wasn’t for Sunseeker, it wasn’t for Fairline and it wasn’t for Oyster. I do however hope that they prove me very wrong.

tbh Sunseeker's one turned out quite well, because of the timing of it all. If Sunseeker had not that Equity investor at that time, it would have finished just like Fairline. Belly up!
They bought at the good time and sold for a good profit to Wanda, which as we can see today, about ten years away from it all was not so bad.

If may be the Equity Investor of the time would have not found a buyer you might have been totally correct, and we would have seen a similar story to that of Fairline or Sealine.
But Ifs and Buts are always Ifs and Buts....

 

[Parabolica]

Indeed

tbh Sunseeker's one turned out quite well, because of the timing of it all. If Sunseeker had not that Equity investor at that time, it would have finished just like Fairline. Belly up!
They bought at the good time and sold for a good profit to Wanda, which as we can see today, about ten years away from it all was not so bad.

If may be the Equity Investor of the time would have not found a buyer you might have been totally correct, and we would have seen a similar story to that of Fairline or Sealine.
But Ifs and Buts are always Ifs and Buts....

Indeed, the Irish lot were in the right place at the right time for both Sunseeker and themselves When RBS pulled their line of credit overnight. The same action by RBS at that time was what caused Fairline it’s woes then too. I remember them having just finished their lavish new standalone HQ which not so long after they had to move out of. It was a horrid time but then for many, out of other peoples misery comes great opportunity i suppose and better someone buy them than no-one at all. Both brands still going through all the mire befitting of the Howards Way series (oh the irony), is a testament to the passion that luxury boat brands evoke.

So with regards to Princess now, we watch this space with baited breath……

 

[jfm]

KPS acquisition isn't new news - was on this forum a week or 2 ago.

Important I suggest not to mix up cause and effect - private equity ownership of boat builders has gone well in many cases and badly in other cases, but so have public ownership and pure private (ie not private equity) ownership. Rarely has the nature of the ownership been the problem. Princess's problem for its now exiting owner has been overpaying in 2007 pre-crash, and operationally the problem has not been private equity ownership for the last 15 years but rather bad management decisions (called out on here at the time, btw) leading to an inability to generate cash. Especially misguided management decisions about taking the princess brand above 90 -100 feet, where it simply can't go profitably, and very punchy levels of misdirected marketing spend, etc.

Ref post #5, I don't get the last sentence of your first para: it would make sense if KPS were buying Princess for some massive price but that's not the case I think - price will be very small.

 

[Parabolica]

Ref post #5, I don't get the last sentence of your first para: it would make sense if KPS were buying Princess for some massive price but that's not the case I think - price will be very small.

That was in reference to the thinking that KBS will be looking to move the business to a country where lower cost manufacturing can be achieved. I feel quite sure that this would have be an obvious question buyers would consider early on but upon due diligence it would have become realised that it wouldn't be sensible to try and do so.

 

[jfm]

Ok understood thanks. My mistake- I meant to refer to your “buttons” sentence but didn’t get that right!

I agree it seems unlikely to make sense now to try to move to Poland etc. Last mover disadvantage. Labour rates there now increasing.

Imho a princess turnaround is straightforward enough, once you’ve bought the business at the right price (which KPS have now done and L Capital didn’t do). The boats are obviously decent. There is too much marketing overhead (people on payroll making YouTubes, etc) that simply isn’t increasing the brand equity. And at the bigger end of their range they need a whole new approach- I tried a sales enquiry and their “we will only do it our way” turned me stone cold.

 

[DavidJ]

My instinct is (not based on any data) that the company would only increase overhead and complexity by segmenting into “do it our way” and “do it the customer way” businesses. So I guess they loose the jfm type buyer but they can‘t be profitable doing both.

 

[Sandy]

Being Plymouth based I've just seen the local rag's article about this.

A few thing spring to mind:

• Plymouth is to become a free port, was that part of the decision;
• Given the B word is labour becoming a problem, most of the people I know working there are from EU countries; and
• How long will they have a manufacturing base in the city?

 

[benjenbav]

My instinct is (not based on any data) that the company would only increase overhead and complexity by segmenting into “do it our way” and “do it the customer way” businesses. So I guess they loose the jfm type buyer but they can‘t be profitable doing both.

I think that’s the point: that @ 100ft buyers want bespoke. Hence, make really nice off the peg boats at the upper end of where the market is for that and make money.

 

[PowerYachtBlog]

I think that’s the point: that @ 100ft buyers want bespoke. Hence, make really nice off the peg boats at the upper end of where the market is for that and make money.

They do not really want Bespoke for everything, though if you put your prices at the high end of the food chain (of fiberglass builds) expect to get those kind of clients.

Up from 24 to about 40 meters people want to choose, and if you are not geared to offer like a minimum of ten veneer woods and a choice of two layouts in this sizes, then I'd say you are in the wrong side of the business. The problem why it did not work for Princess M line is that they copied/pasted literally there business model of smaller sub-twenty meters and put into that of larger boats.
The planning of the South SuperYacht Yard was all well done, but the execution of it was not.

For example Sunseeker have understood this side of the business back in the 90s.
You can look for example back in the 90s for the bespoke 1994 made Predator 63 finished in classic style if I remember well designed by Ken Freivokh. That was made before the Predator 80.
Now they made only one this way, but the fact that they do it showed what these kind of clients usually want.
Fairline was also in a good way doing it right with the custom program it introduced for yachts over sixty feet (I think was 2009) doing some good changes to have a custom program integrated into the build, to make it efficient and less costly as possible.

 

[Portofino]

The salient point ( when I was running a business) was never say no .Never get a prospect “ feeling stone cold “ .
Once you have them across a table warmed to each other then normally you either compromise together or simply meet expectations and price accordingly.
Either way you have the business and crucially denied a competitor, in JFM s case San Lorenzo getting the work .

Sorry to bring in Amarti but even Itama in his tenure did one offs bespoke stuff .Mines lost its shower room ,gained more storage cupboards / draw ( ex charter ) built to some sort of commercial a code with water tight bulk heads etc , larger day heads at the expense of galley space ( again day charter +taxi for a Capri hotel owner ) , no carpets teak + Holly cabin soles and so on .You could get him to build anything.
But @ a price obviously.
Its better to say yes within reason than say nope they “only come with cream carpets “ etc .”

 

[jfm]

My instinct is (not based on any data) that the company would only increase overhead and complexity by segmenting into “do it our way” and “do it the customer way” businesses. So I guess they loose the jfm type buyer but they can‘t be profitable doing both.

Yup but they’re not profitable as is.

 

[47GC]

Not much to add here, I agree that princess should stay out of the big stuff 90+ and concentrate making the business profitable. Like others have said, princess wont change the waste pipes never mind any real custom stuff that the big boy owners want. Stick to what you’re good at, as they say!

 

[DavidJ]

The salient point ( when I was running a business) was never say no .Never get a prospect “ feeling stone cold “ .
Once you have them across a table warmed to each other then normally you either compromise together or simply meet expectations and price accordingly.
Either way you have the business and crucially denied a competitor, in JFM s case San Lorenzo getting the work .

Sorry to bring in Amarti but even Itama in his tenure did one offs bespoke stuff .Mines lost its shower room ,gained more storage cupboards / draw ( ex charter ) built to some sort of commercial a code with water tight bulk heads etc , larger day heads at the expense of galley space ( again day charter +taxi for a Capri hotel owner ) , no carpets teak + Holly cabin soles and so on .You could get him to build anything.
But @ a price obviously.
Its better to say yes within reason than say nope they “only come with cream carpets “ etc .”

I’d say not all business is good business. The skill is to recognise a jfm early on in the discussions and part as friends, not wasting each others time with a product that doesn’t fit. I agree leaving the “buyer“ feeling stone cold is poor salesmanship.

 

[henryf]

So I’ve got some skin in the game as a customer but not an investor. A charter client who was something to do with selling the company told me everyone wants to buy a Princess but not Princess the company, certainly not at the price being asked.

JFM and I are both boat owners in the process of buying new boats. Lovely though he is - and he is a far nicer person than me by a country mile, he isn’t a Princess owner whereas I am.

I want a boat that ticks my boxes and which someone has done all the hard work for me. I don’t want to have to learn an entire industry. JFM is a naval architect masquerading as a corporate legal / accounting / acquisition guru. He wants to fine tune every inch of his new boat and that means Princess won’t work for him. They don’t do customisation beyond a few well tested options and a choice of wood / fabric / carpet. Great for me, not so good for JFM.

Where things differ from the likes of Fairline is Princess have always been sufficiently well funded to keep developing good product. They have an order book of nearly £1 billion stretching forward probably 2 years. They haven’t been working on a shoestring.

They have a decent production facility which I’m sure can be improved upon but it’s not bad. They’ve suffered with materials supply in recent times but that’s industry wide and that has limited the number of boats that can be built. They need to build around 250 to break even, 300 would be a great year.

Ignore the purchase price of the company and operationally I think profit is there to be had. There’s an additional production facility planned - in Plymouth, they aren’t moving overseas, new models in the pipeline and a product that genuinely holds its own on the world stage. I’ve tried on a number of occasions to buy something other than Princess but failed. For me they work and you only need 299 other people in the world to think like me.

I’m looking forwards to seeing what this new partnership brings over the next few years because it will dictate what’s available for our next boat purchase. Will Princess still be around and made in Plymouth? Yes, I think they will be.

 

[MapisM]

Ignore the purchase price of the company and operationally I think profit is there to be had.

Non sequitur. What else do you think a company value is based on, other than its profitability?