Backing The Right Horses
The nature of many marine businesses means that there is inevitably going to be an influx of new faces and ideas entering the industry as founding owners choose to cash in and move on.
We spoke with Rob Cotterill, who acquired Hampshire-based Advance Yacht Systems, to learn about his motives for investing in the marine industry, tips for successful acquisition, and thoughts about the future.
Advance Yacht Systems in Romsey had operated as a specialist technical marine equipment distributor for more than 15 years before owner founders, Rod and Caroline Boreham decided it was time to sell. Rob Cotterill was a keen sailor and former BT systems engineer turned fintech entrepreneur with a technical background who had decided upon a lifestyle change. He was looking for a business offering a more tangible revenue generating model that would enable a south coast relocation, near his racing yacht.
“I was spending every weekend on the boat and wearying of the commutes from London,” Rob recalls. “Plus, I wanted to move into owning a real business generating profits, not a start-up absorbing capital. I started my search by Googling marine businesses for sale and found several companies being handled by marine acquisition specialist, First Peninsula. Among them, I saw that Advance Yacht Systems was of a size that was affordable but big enough to be interesting in terms of the revenue it could generate from a sector that interested me. It also had long-standing supplier relationships providing sufficiently unique attributes to make its business protectable.
Ensuring a successful transition
“When I committed to buying Advance, I had very different initial ideas compared to the previous owners about how to ensure the continuity of our key partner contracts and relationships. I thought Rod and Caroline should contact suppliers, tell them things were changing and get them to commit to contracts under the new arrangements before we finalised. They rightly urged an alternate plan of being gradually introduced with time to build relationships before taking full control. They were right!”
Another thing that changed during the acquisition was the transition period, which moved from a few months of Rod and Caroline serving as consultants to a longer timeframe due to Advance securing a large contract, which increased the value of the business but made it hard to assess as all the revenue had yet to come in. Rob acquired half the business in July 2022 and then made two stage payments for the balance based on performance over 12 months, finalising his full ownership in July this year.
“It meant that I had Rod and Caroline in the business for the first six months while they were still majority owners, and then kept their involvement for the second six months while they still maintained a significant minority interest – a good long-term handover. It wasn’t the instant retirement they were hoping for, but they got more money out of the transaction as a result.
“Luckily, our personalities meshed well, and it helped that I viewed Advance as a successful business that shouldn’t be messed around with too much. It meant they weren’t having to deal with someone coming in to try and change their baby – something that can cause a lot of friction in arrangements like this.
Acquisition pointers
“It is easy to not understand a business well enough and come in with lots of outside ideas and then undermine all the things that make it successful. I was very conscious of that, which made it emotionally easier for them. They were also keen to see me succeed, introduce me to suppliers and customers and to kick all those relationships off. It also helped the transition with our two very loyal and valued staff who run our technical and operational services. It means I can now spend time on the business to work on things I believe will really pay off, knowing that the underpinning foundations are secure.
“If you are buying a business, an earn-out arrangement works, provided you come in with humility. You will learn more than you are able to bring in the first days of ownership. If you are selling, you should be prepared to commit to an effective transitional arrangement if one is requested. People would often prefer to hand over the keys and walk away, but most small to medium marine businesses are relationship based and those relationships are intrinsically linked to owners. It takes time to successfully transfer those personal loyalties – certainly months, not weeks.”
Technical service
Another attraction of Advance Yacht Systems for Rob was the technical nature of the products it represents and supports, which meshed well with his background. The company describes itself as sole UK distributors for well-engineered marine equipment, predominantly generators as well as major equipment that consumes the power that generators produce.
For generation it supplies VTE Paguro and Westerbeke, with inverters and chargers from Cristec. On the consumption side it distributes Frigomar air conditioning and Dessalator watermakers. The latest range to join the company’s portfolio is Remoran Hydrogenerators, the company’s first step towards a low carbon future.
Advance has three routes to market, direct to consumer via its website and boat shows, dockside suppliers and OEMs. Each channel accounts for around a third of its business, a good balance to deal with market fluctuations. Following the pandemic boom there has been a drop-off in large ticket items from retail, but that has been compensated by the forward order book of new boat sales.
Unit sales activity is backed by technical support. The company assists with the correct specification of its equipment within onboard systems. It also converted its meeting space into a training room to meet demand for teaching fitters and boat sales professionals about the kit it supplies. Advance offers aftersales support – satellite calls from blue water cruisers in the Pacific are not untypical – and parts supply with its website optimised to attract enquiries internationally as well as the UK.
Changing technologies
Rob is mindful his investment in Advance is happening at a time of great transition as the industry seeks ways towards a carbon neutral future: “It’s clear that we’re going to need to shift from fossil fuels to something else in the next 25 years. In the short term, there will be opportunities for us to provide internal combustion generators as range extenders to make the adoption of electric propulsion more practical for a wider range of boats such as blue water cruisers.
“Optimising energy use is now on everyone’s radar. The inverter technology in products we represent is not only quieter but also more efficient and better suited to the larger DC energy storage systems that are coming into use on boats. After that, we are keeping a keen eye on developments with things like electric charging, solar, hydrogen and alternate fuels to ensure we identify where we will fit in the marketplace. Recently taking on the Remoran hydrogenator range is a step towards that.“There are changes right now due to the advancement of new technologies that we are mindful of when supporting our products. DC motors run hotter when powered by lithium cells, so that must be considered if working with a product which runs for extended periods of time, like a watermaker.
Our customers are asking a lot more questions about power consumption and those relate much more to DC rather than AC supplies as they seek to directly use stored power from solar, wind and hydro. Within our Frigomar line-up we can deal with this due to the existing inverter technology but also now through a new range of DC air conditioners.
“Our work in training people is becoming more relevant too as the industry needs additional numbers of capable marine electrical fitters due to existing skills shortages and increasing market demand.
“As a business, the support we receive technically from British Marine has been a key reason for our membership, alongside other benefits such as boat show discounts and free credit reference checks. Being new to the industry I thought it would be good to get involved personally with the British Marine Trades Association and have served on the committee for a year now. That’s enabled me to get a better feel for what is going on and meet new people.
Future forecast
In terms of what the next few years, Rob is pragmatically optimistic: “Business doesn’t seem quite as positive as it did when everyone was trying to buy a boat in response to the pandemic. But it feels like I’ve entered an industry that’s going to stick around and evolve technically.
“People love boats and will still want to continue using them. The way in which they do so is where the opportunity exists. The area of energy generation, management and consumption is evolving quickly. It’s all about backing the right horses.