February 14, 2005 (Buyouts Magazine) – It’s a magnet to those who follow in the lifestyle. From all directions, it attracts the experienced and the curious alike. Some only have to travel 10 miles to reach the destination, while others, in a display of their devotion, travel thousands of miles to pay homage to this life affirming landmark.
This is not a religious pilgrimage. It’s the annual migration of tens of thousands of recreational vehicle enthusiasts to Lazydays RV Center Inc., the world’s largest single-site motor home dealership in the world. Lazydays – fashioned more like a motor home resort than an RV dealership, including restaurants, outdoor concerts and a swimming pool – primarily sells high-end Class-A motor homes which average about 40 feet in length and cost an average of $120,000 brand new.
The RV market as a whole, by means of its unique and unswerving customer base, is poised for growth. With baby boomers coming of retirement age – and the average IRA account for a 60-year-old worth about $106,044, according to the IRS – many soon-to-be retirees will be ready to coast through their golden years in style. Reflecting this, RV sales across the board showed incremental growth in 2004 compared to the year before, according to RV Trade Digest. Class-A motor home sales alone increased almost 19% last year.
But surprisingly, private equity firms – usually an eager crowd to take a bite out of the next baby boomer-fed market – have largely steered clear of making direct investments in the space, focusing instead on manufacturers that count the RV industry as one of their end markets.
Last April, however, New York-based buyout shop Bruckmann, Rosser, Sherrill & Co. LLC traveled down that lonely road and bought all 140 acres of Lazydays in what could turn out to be a landmark investment among the PE community.
Fees included, Bruckmann won the Seffner, Fla.-based dealership in a Harris Williams-led auction for $217 million, approximately 5.4x Lazydays’ LTM pro forma EBITDA of about $40 million. The firm infused $62 million in equity and used a $155 million high yield offering led by Deutsche Bank to finance the transaction. Lazydays’ sellers included majority holder PPM America; Donald Wallace, the founder and CEO of the company; Lazydays’ Employee Stock Ownership Plan; and other shareholders of the company. Wallace kept a 10% stake in the company and maintains his role there.
Lazydays had been on Bruckmann’s radar since the third quarter of 2003. “For the deal’s size, it was a rather engrossing process because it was in an industry that is not typically invested in by private equity guys,” said Thomas Baldwin, a managing director at the firm. “We had to think through what was the appropriate financing structure for the deal… It’s not like the high yield [bond] buyers can simply look back at the last 10 private equity-backed RV deals that they’ve bought into at their pricing multiples and things like that. [Lazydays] is a totally unique company, and this was a very unique offering.”
With 2004 sales just shy of $800 million, Lazydays sells 17 RV brands including Winnebago, Fleetwood and American Coach and employs about 700 people, including a staff of 160 golf cart-riding salespeople who are responsible for selling about 8,000 new and used units per year at prices between $5,000 and $1.2 million.
Twenty-eight-years old, Lazydays does not just sell one RV and move on to the next potential purchaser. With a customer database almost half-million names long, approximately 70% of Lazydays’ sales involve a trade in from existing patrons. The average customer trades in, or upgrades, their RV every three to four years, said Nicholas Sheppard, a vice president at Bruckmann. To realize such loyalty, every Lazydays salesperson receives an hour of sales training every day.
“[Lazydays] is an example of a business that’s gone from being a retailer to being a destination location for the [RV] enthusiast. As a result, their sales have grown at a 28% compound rate since 1980 compared to an industry-wide average of 11% over the same period,” Sheppard said.
And with 220 service bays attached to the facility, a landscaped 300-unit rally park (complete with power hookups and Internet access) where customers can park overnight while having their motor home serviced or while they’re looking at new product offerings and the Lazydays Cafe, an onsite restaurant that serves about 300,000 (free) meals every year, the company can handle the high volume.
Just last year, Lazydays held the grand opening of its latest amenity geared toward its high-end customers: the Crown Club. The exterior of the Crown Club clubhouse – complete with palm trees, swimming pool and tennis courts – resembles a cross between a Beverley Hills mansion and an Arabian palace. Inside, hardwood floors and walls adorn the entry hall, florid dining area and barroom. Every Lazydays customer that purchases an RV valued at $250,000 or more gets a three-year Crown Club membership, which on top of the amenities listed above, grants them access to an exclusive parking area and 43 additional service bays.
“Their slogan is, You have too see it to believe it,’ and they’re right,” Baldwin said.