PADI has been sold to another investment group. Thoughts?

[boulderjohn]

The call for dive shops (not instructors) to unionize has me baffled. The purpose of a union is to protect workers from being taken advantage of by management. Who would be the management in the case of dive shops?

 

[vladimir]

The call for dive shops (not instructors) to unionize has me baffled. The purpose of a union is to protect workers from being taken advantage of by management. Who would be the management in the case of dive shops?

I took it to mean "form a union," rather than "form a labor union," because otherwise it makes no sense, instead of very little sense. I'm imagining an OPEC-like cartel of dive shops banded together to negotiate a better deal from ScubaPro and PADI.

 

[Quero]

Theres a big exception though, for profit harvesting. PE funds will generally not manage day-to-day operations, but they will manage the capital structure, major transactions, etc., and they routinely cause the companies to pay "management fees" to the fund management firm in exchange for this "service."

There are a few ways for management fees to be covered. One occasionally used strategy is to take the expenses for PE management directly from the company being managed, as you suggest happens, but this can only be done if the manager is working exclusively on projects related to a specific company, and even then the expenses are typically paid as they are incurred. For example, if a PE manager has to spend 100% of his/her time working, say, as the CFO of an acquired company until a permanent employee can be hired to fill the position, and must travel back and forth or relocate temporarily to the acquired company's location, then the expenses and the salary of the manager would typically be debited on the company's balance sheet. More commonly, one of two other strategies is employed. The first one involves taking the management fees directly from the invested moneys in addition to the amount invested directly into the acquired company. In other words, if the acquisition is, say $50 million and management fees are set at $1 million, then the fund supplies $51 million towards the acquisition and fees together. Another common strategy is to take the management fees as a percentage of the final sale price of the acquired company when it is resold some years later. This strategy is the most forward looking as it aims to add value to the company so that both investors and the PE profit according to the performance achieved. It's quite the opposite of impoverishing the company merely to enrich the PE investors. This third strategy is the one employed by the PE I invest in.

... one popular PE strategy many aeons ago was to comb through sec filings looking for companies with a lot of old real estate on their balance sheets. <snip>

This is an old strategy, and one that has not proven stable over time. It's a particularly risky undertaking since covering the debt from the heavily leveraged borrowing frequently used to fund the acquisition (c.f., the RJ Reynolds acquisition) really does put the company in a precarious financial position and at the mercy of general economic stability. However, this scenario isn't anything like what we see in the PADI acquisition. Furthermore, this strategy has been virtually supplanted by other strategies, particularly that of adding value to the acquired company in order to sell it at a profit at a later date. This deferred-profit strategy requires more time and care to produce results, but in the long run has a far better chance of maintaining and enhancing the financial health of the acquired company. At any rate, the leveraged purchase strategy isn't necessarily applicable to all acquisitions, and I very much doubt that anything of the sort is even possible in relation to PADI Worldwide.

 

[njmorrell]

I don't suppose there is any chance a PE firm would IPO PADI so we could all get stock options and make a bit of money?

 

[captjohnr]

'The Lincolnshire team is hoping to help PADI expand into Asia.' More Jobs for China !

 

[Paulmal]

'The Lincolnshire team is hoping to help PADI expand into Asia.' More Jobs for China !

Is it really that bad that millions have been lifted out of absolute poverty (less than $1 per day per family member). Even the homeless in America make more than that.

 

[The Chairman]

Is it really that bad that millions have been lifted out of absolute poverty (less than $1 per day per family member). Even the homeless in America make more than that.

Rly! It's not like we are outsourcing diving or dive jobs. Methinks he has a grudge against PADI.

 

[r stevens]

I have been with PADI since 2007, have taken courses all the way through DM. In 2013 I interviewed two dive centers for my IDC. I was amazed at the cost, and how much of the cost went to nothing but fees and testing fees. Also the membership requirements, the insurance cost. It would have taken a LONG time to recuperate my investment.
I think PADI got away from making diving fun and affordable. Also, having interviewed other agencies, PADI needs to update their 'model', both business and training.
Good luck to those shops and people still with them

 

[The Chairman]

He resurrected a 4 1/2 year old Zombie Thread!

 

[Wookie]

First post. It's all good.