Welcome to our annual State of the Industry package.
When it came time to plan this issue, a couple of key observations helped shape our feature package. The first is how the investment world has come to view the pool sector with increasing interest and what that might indicate for our industry. The second is the fast-paced growth of the franchise business model and whether it might make sense to join one.
The two features dovetail quite nicely — in the first, we take a 30,000-foot view of the relationship between the industry and private equity, and what it means for our future; the second offers a more boots-on-the-ground look at smaller businesses and franchising. At first glance, it’s interesting to note that what they share in common is how they both serve pool and spa business owners with a satisfying exit strategy. Industry mergers and acquisitions have accelerated in the past year or so among manufacturers, giving owners an opportunity to shepherd their legacy into its next chapter of growth while offering a well-deserved plan for retirement. Franchises offer a similar hope on a smaller scale, allowing mom-and-pop retailers and service companies the same opportunity.
But it’s not always an easy path. Due diligence is required by all involved parties, and prospective sellers undergo a stringent vetting process. I was surprised to discover this to be true of franchises, and this is most certainly true in the investment industry. Private equity currently is sitting on a record cache of “dry powder,” or cash stockpile, at $1.1 trillion. Part of what’s contributed to that hoard is a higher level of caution in making investment decisions, involving thorough and perhaps sometimes a painful level of vetting. But what’s important to remember is that with all that money to invest, the pool industry is looking more and more attractive to private equity managers. Indeed, we need only to look at last year’s acquisition of Hayward by a trio of private equity investors as evidence. Hayward’s streak of acquisitions since then (pHin and Paramount) also point to an aggressive growth plan.
So how might this serve to transform our industry? With private equity firms casting an appreciative eye our way, they’ll be looking to see how we deal with some of the major issues we face industrywide. For example, the perennial lack of skilled labor will necessitate innovation in creating labor-efficient solutions and products. Another possible area for scrutiny is in the promise of maintenance-free solutions and energy efficient products, both of which tends to draw consumers in like bees to honey. You can be sure investors will be paying close attention.
