othing has changed the landscape of the pool and spa industry more than the relentless wave of business consolidation in recent years. While some worry that it could create an unbalanced playing field and affect product availability, others say that it is simply part of the natural progression of any industry.
“It is the nature of business itself,” says Scott Levin, president of the Pentair Pool and Spa Division in Sanford, N.C.
In the past three years, consolidation has come in waves. In 2001, the pool and spa industry saw 13 major acquisitions, then fell back to just five in 2002. But in 2003, the consolidation machine revved up higher than ever with 18 more major buys.
It doesn’t look as if 2004 will be any different, what with key industry players continuing to buy and expand. An obvious example is Pentair Pool Products’ acquisition of the Sta-Rite line of pool equipment in April. Some industry professionals have expressed concern about this ongoing blitz of mergers and acquisitions, but many say it’s the best thing to ever happen in the pool and spa world.
Attention, shoppers
Proponents of consolidation say that most industries — including this one — start out fragmented and are populated by mom-and-pop operations and wide-eyed entrepreneurs. But these trailblazers can carry their business torches only so far due to limited resources.
“You see that in small companies, where they get to a point and then stagnate and can’t get to level two,” says Manuel J. Perez de la Mesa, president/CEO of SCP Pool Corp. in Covington, La., the industry’s leading distributor of pool products. “To get to level two involves increasing the depth of financial resources and management talents.”
Indeed, Mark Laven, president/CEO of Latham International, believes consolidation should be looked at as a welcome investment in the pool and spa industry. These investments help the industry expand, grow and remain healthy, surmises Laven, whose Latham, N.Y.-based firm has done its share of buying in recent times.
Other business leaders agree. In the Harvard Business Review on Mergers & Acquisitions, Alex Mandl, former president of AT&T, says, “In the last three years, growth through acquisition has been a critical part of the success of many companies. ... In fact, I would say that mergers and acquisitions have been the single most important factor in building up their market capitalization.”
Laven says he could see the writing on the wall for his business years ago. “I remember participating in a management meeting at our Pacific Pools division,” he recalls. “We felt that as we looked down the road, the [large] number of package-pool makers would consolidate into a handful of national players instead of a couple of dozen of regional players.
“And I think that is what has occurred,” he adds.
Not for everyone
Inevitable or not, some say that so many mergers and acquisitions harm the industry. There are worries that too many buys reduce competition and impact pricing in certain markets. Also, there’s a fear that the entrepreneurial spirit and the ingenuity that goes with it will be lost.
“The impact of consolidation is less competition and creativity,” says Bill Kent, president of Horner Equipment of Florida, a Fort Lauderdale distributor and manufacturer.
Kent predicts that as consolidation continues, the quality of existing goods will increase, but the creation of new and innovative products will fall by the wayside.
“It’s already starting to take place,” he notes. “We don’t have the influx of great new ideas like we used to.”
Builders have a different set of concerns when it comes to consolidation. Many long-timers worry that the relationships they’ve cultivated over the years will be adversely affected. For example, if a builder has a “point person” at a particular manufacturer and the company is sold, this individual contact may be lost to the builder forever.
“It has the potential to upset long-term relationships,” says Bruce Dunn, owner of Mission Pools in Escondido, Calif., and a Pool & Spa News Top Builder. “I am big on having a trusting relationship with our vendors.”
Also, bigger is not always better, Dunn points out. Larger companies have more layers of bureaucracy, which makes it more difficult to reach the decision-making person.
The concerns expressed by Kent and Dunn may be valid, but all indications are that industry consolidation will continue. “This is a relatively young industry and [consolidation] is just a natural part of the maturing process,” concludes Jack Cergol, chief staff executive of the National Spa & Pool Institute in Alexandria, Va.
