The Mustang Group is banking on stability in the golf industry and growth opportunities with its latest investment. The Boston-based firm led a buyout of Country Club Enterprises, a company that distributes golf cars to golf courses in New England, the firm disclosed to peHUB sister publication, Buyouts.
Managing Partner Ben Coes said the deal came in under $100 million in enterprise value, but declined to discuss specifics. CEO David Farina and The Gladstone Companies, a McLean, Va.-based investment firm, invested alongside Mustang. Gladstone also provided sub-debt and TD Banknorth NA provided senior debt. The Wareham, Mass.-based company employs 50.
Investing in a golf car company doesn’t seem like the most logical investment during a recession. But during due diligence the firm determined the company, and the golf industry, was stable and presented significant growth opportunities.
According to Coes, rounds of golf—which drive the use of golf cars—have increased in New England about 2 percent annually for the last five years, and the company’s revenues have increased 25 percent annually for the last five years, so the business is stable. Further, Golf cars are a critical cash source for courses, which lease the cars by the fleet, Coes said, and Country Club Enterprises is the largest distributor of two major brands—Club Car, manufactured by Ingersoll Rand, and E-Z-Go, manufactured by Textron. The firm’s research going back to 1990 also showed that laid off people continue to golf while traveling less, suggesting they might continue to golf at their local club while holding off on vacation, Coes said. “We realized that not only is there relative stability in rounds—and that’s through economic cycles—there’s downside protection in that even in down times, the car is a powerful cash generator for clubs,” Coes said.
The growth play, which was most attractive to Mustang, comes from the manufacturers. Ingersoll Rand and Textron have been expanding the product line to include golf car-like vehicles for farming, hunting, gardening and other general uses which Country Club Enterprises has begun to distribute. Mustang is accelerating that process. “Country Club Enterprises has the opportunity to really grow that business, and that’s where we see the growth and the excitement of the future,” Coes said.
Shields & Co. Inc., a Waltham-based boutique that shopped the company, first brought the deal to Mustang in April 2008, and the firm closed the deal in November. Coes said Mustang did not announce the acquisition earlier because it wanted to announce another deal first—its February acquisition alongside Alta Communications of Mr. Youth, a New York-based social marketing agency—and because it has been concentrating on working with Country Club Enterprise’s management to expand its product line.
Mustang isn’t the only firm to invest in the golf car industry. In May 2007, Sentinel Capital Partners sold Nivel Holdings LLC, a distributor of after-market replacement parts for golf cars, to Audax Group, as previously reported in Buyouts.