If you haven't paid your bills, you better keep an eye on your ATV.
New York private equity firm Falconhead Capital LLC has acquired National Powersport Auctions, the nation's largest auctioneer of repossessed all-terrain vehicles, motorcycles and personal watercraft and boats.
While terms were not disclosed, the deal is worth close to $50 million, said sources familiar with the transaction.
"NPA is the unquestioned leader in the U.S. powersport auction business, with a very dominant [market] position," said David Moross, chairman and chief executive of Falconhead.
The 14-year-old Poway, Calif.-based company auctions repossessed, recovered and salvaged power sport vehicles at a rate of more than 2,200 a month from its headquarters outside San Diego and another location in Austell, Ga.
Most of the vehicles are purchased by recreational vehicle dealers, often in $400,000 to $500,000 bulk purchases, Moross said. Last year, the auctions generated more than $100 million in gross revenue for National Powersport.
From a private equity perspective, the company offers strong and stable cash flow, literally no capital expenditures and a strong management team, Moross added.
Moross said the repossession of powercraft vehicles is expected to grow annually at a compound rate of 6% to 8% over the next five years. He said that National Powersport hopes to grow by handling the consignment and trade-in market.
"That business is clearly where we are going to drive this business to capture a much larger market than the repo market," he added. It may also make acquisitions, he added. There is room to expand outside its current bases, particularly in the Midwest, he said.
The business picks up in a recession, but it not that cyclical, he said.
National Powersport's management team are rolling over 40% of their existing equity in the deal. Cliff Clifford, a co-founder, will become president and chief executive. Falconhead and Chicago's Madison Capital Funding LLC will own the remainder of the company's equity. Some members of co-founders' families are exiting the business through the deal.
Madison Capital also provided $17 million in senior financing, said a source. In addition, there was $7.5 million of seller financing. The deal closed Feb. 19.
Falconhead manages a $215 million fund and invests in leisure, lifestyle, media and sports-related companies.