Understanding Acquisitions

What is an acquisition? An acquisition is a business move conducted by a larger, or more powerful, company to gain control of a smaller, less successful or struggling company, or possibly looking for a strategic advantage of acquiring a smaller company to improve the larger company quickly.??

When one company acquires another, it is primarily done to get a portion of the profits or synergies without affecting the acquiring company’s brand or image. The company will likely still exist, but ownership will change.?

Vertical Acquisition

A vertical acquisition is probably the most common type you will find. The company buys another business or company. The acquisition is generally for a company higher or lower in that specific product or service industry. For instance, in our business, a vertical acquisition might be that an FEC or theme park buys a video game manufacturer or dealer. That’s where it gets the term vertical.

It’s beneficial for a larger company to buy a smaller company that produces or sells the goods that make the larger company more money.?

It is easy to see that this choice saves the larger company a lot of money in the process. They don't have to go buy the land, spend money to build or pay for producing the goods- they can simply take what is already there and transform it into money-making opportunities.?

Horizontal Acquisition

This type of acquisition describes buying the same type of company for an immediate and ongoing return. Let's say that you have a park or FEC and your competitor isn't doing very well financially. This type of acquisition would describe a power move by your company to acquire your competition. You would then have a fully operational business that you could take over and begin to manage without a whole lot of expense to try to build a new one.?

The fact is, it is easier to acquire than it is to build a whole new facility and usually you can purchase this type of business for a large discount or “cents on the dollar” then to build a new FEC.

Conglomerate Acquisition

Conglomerate acquisitions occur when a company decides to branch out into an entirely different industry. Surprisingly enough, this happens a lot. You would probably be surprised to find out that some of your favorite brands in (human and/or pet) food, household cleaning supplies, and maybe even hygiene products are all under the same umbrella.

When a large company is very successful they branch out and try to capture different products and services that are also doing well (or have the potential to do well), regardless of the industry. They may each have different names but they can very likely be under one corporate umbrella or mother corporation.?

Market Extension Acquisitions

Market extension is very similar to a horizontal acquisition or merger. The two companies will most likely be in the same industry. In fact, they’re more likely not going to be competitors because they belong to different markets.

Typically, this is when a “similar” company decides that the smaller business may become a threat down the road, and so a move is made to acquire that company and make it their own to eliminate that competition.

So What’s the Best Acquisition Strategy for FECs?

It depends on your company’s goals and what you are trying to accomplish. Every business has its strengths and weaknesses.??

• Are you looking to control product pipelines through a vertical strategy to complement your existing FECs??
• Are you looking to acquire more FECs through a horizontal strategy to rebrand them into your brand?
• Are you looking to acquire different assets to diversify your business with other performing assets in a conglomerate acquisition?
• Or, are you looking to acquire a smaller competitor who could grow into a larger competitor over time so you’re thinking of taking them out now under a market extension acquisition??

Whatever the acquisition strategy you have in mind, acquisitions can usually draw a value opportunity as well as speed in ramping up your business quicker and for less cost than building the potential acquired assets from scratch.? The downside can also be that the acquisitions might cost you time and money if you cannot merge the assets as intended, the cultures do not work well together, or new competitors move quicker than planned for possibly taking the market share or compatibility that you were searching for.

What are your thoughts and goals for your family entertainment business? If you want to talk through your ideas and brainstorm with me, feel free to book an appointment on my calendly link provided below. I’d love to help you explore the possibilities.

?Have you read an article I’ve published here on LinkedIn and want to talk about the topic a little more? If you’d like to book a call with me regarding the Family Entertainment Industry or Private Equity, please feel free. I enjoy connecting & collaborating with others in the same professional space.

Tim Murphy is CEO of APX Operating Company, dba Boomers Parks, under the ownership of Cerberus private equity ($60B assets). Boomers Parks owns six family entertainment centers and two water parks with locations in California, Florida, and New Jersey.

As CEO of Boomers Parks since 2020, Tim took these eight parks from bankruptcy to profitability in just a year – in the middle of a global pandemic. When Boomers acquired these parks, they were operating at a $10 million loss. Tim transformed the customer experience and added new revenue streams to generate a 180% increase in revenue in 2021 and on a similar trajectory in 2022?

Tim launched his 35+ year career at Walt Disney World and has since served more than 150 entertainment, restaurant, and food & beverage brands across more than 10,000 locations in C-suite and senior positions.

Additionally, Tim is a Board Director with Coney Park & Happy City - Family Entertainment & Amusement Parks, part of The Carlyle Group ($276B assets), a private equity firm that operates 150+ family entertainment centers and amusement parks in Latin America.?

Tim has worked with top-tier entertainment and restaurant brands including Disney, Rebounderz Trampoline Parks, Darden Restaurants (Olive Garden, Bahama Breeze, etc.), Red Lobster, Jimmy John’s, Applebee’s, Sonny’s Bar-B-Q, Denny’s, El Pollo Loco, Hardee’s, Golden Corral, and Firehouse Subs.

Tim has overseen more than 35 purchase transactions involving over 1,200 restaurants, stores, and park locations.? With extensive experience in buying and selling businesses, handling negotiations with buyers and sellers, and creating strategic partnerships to build strong brands, Tim has facilitated deals ranging from $11 million to $350 million+?

Tim is a member of International Association of Amusement Parks & Attractions (IAAPA), California Attractions and Parks Association (CAPA), Florida Attractions Association (FAA), American Amusement Machine Association (AAMA), National Restaurant Association (NRA), California Restaurant Association (CRA), World Waterpark Association (WWA) and International Franchising Association (IFA). He is a licensed commercial real estate broker in the State of Florida. Tim earned a BS/BA in Accounting from the University of Central Florida and an MBA in Finance from Orlando College.