I've been reading up on Aqualung (AL). There's nothing fundamentally wrong with the core AL as an equipment maker, it's just that they are overburdened with debt. The problem is that their original parent Air Liquide had to sell them off to raise cash for a big acquisition in their core business. The purchasers, Montagu Private Equity, were typical private equity sharks who paid for the company with borrowed money. They then stripped out as much cash as they could by selling off AL's real estate and other profitable bits. They also greatly reduced costs by firing everyone possible which made their revenue from operations look better. This plan was to sell the company after a few years (before the lack of qualified employees completely cratered the company). The higher revenue numbers should have resulted in a sale for more then they paid, so they could pay off the loans and keep the rest.
It was all going to plan until COVID hit. Even with reduced costs, they weren't producing enough revenue to meet their interest payments. And then when they thought they were through the worst of it and scuba sales started to pick up, interest rates shot up. They are now so far in the hole that Montagu is essentially handing over the company to their largest lender, Barings.
So what happens after Barings takes over? Barings is not going to want to be in the scuba equipment business so will get what they can by selling it as soon as possible. Ironically, Montagu's asset stripping might end up saving it as a company since it has to be worth more as a going concern than if it were to be liquidated. Best case for AL fans is that it gets bought by someone who wants to keep manufacturing most of their products, either a rival or the other, rarer, type of PE firm that makes their money from the revenues of their businesses rather than asset stripping and financial manipulation. Worst case is that it's bought by a rival who only wants the brand names and dealer network only and shuts down any remaining manufacturing. The likelihood is that it's somewhere in the middle, with the most profitable lines continuing.
Apeks is a bit of a wild card. It's a much more attractive business than the rest of AL and might end up being sold off separately.
