How do we encourage investment in the superyacht market? Investors, according to Alan Dargan, founder of Lonsdale Capital Partners, and Jonathan Turner, partner at Bowline Capital Partners, are essentially lazy. Presented, very literally, by a world of investment opportunities, the onus is on us, the superyacht industry, to educate investors and reposition the market in such in way that it becomes appealing to alternative sources of capital.
From the outside, the superyacht industry is perceived to be a low margin cottage industry with limited immediate growth opportunities - the remit of the rich and the frivolous, a factory for loss making toys. However, while the perception of the new build market is an industry fraught with risk and uncertainty, especially if you consider the number of yachts being built on speculation, this perception fails to account for the myriad profitable service and maintenance businesses that exist within.
If you consider that, since 1982, the superyacht fleet has grown in size every year, it paints a rather different picture. Albeit at a modest pace, this limited growth means more yachts that require services and maintenance and it is these markets that exemplify the greatest opportunity for investors.
“That actually creates a pretty interesting market place, one that drives service revenue,” explains Dargan. Earlier this year Lonsdale Capital Partners bought a majority stake in Global Yachting Group (GYG), the parent company of Pinmar, and Dargan explains that they “hope to make three to five times our money over a three to five-year period,” as befits Lonsdale’s investment model.
The GYG transaction acutely showcases the opportunities to be found within the superyacht industry – provided investors are approached in the right manner. GYG was aided in the transaction by employing the advisory services of Bowline Capital Partners.
“It is important that you frame your industry in the correct way,” says Turner. “If you allow your company to be framed within the wider marine industry, especially in the sub-30m market, this has traditionally been a pretty scary place for investors. This market place needs to be segmented in order to distinguish itself from the tribulations of smaller, more cyclical, boat markets. In your presentation you need to change your point of reference and focus on the fundamentals of your own business.”
While the sums on money spent on individual superyachts can still be staggering, as a global market its revenues are still relatively small. Tying ones’ business to the prestige of this industry may not be the most effective way to grow; prestige holds little sway when the numbers don’t add up, far more important is stability, proof of recurring revenues and a long term growth plan.