Mantra
Contributor
I'm interested in taking the new advanced derivatives nav cert, and possibly the tecrec nitrox short selling specialty.
PADI has been sold to another investment group. Thoughts?
- Thread starter Jim Lapenta
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I have been expecting this. I knew that a private equity company that I've got shares in was considering a bid (I learned this back in April or May and was asked for input and insights), but I was under confidentiality agreements not to comment that the PADI ownership was up for grabs. Ultimately, the particular investment firm I have an interest in didn't make a bid, so I now have no conflict of interest restraining me from comment!
What remains to be seen, in relation to the new owners, is whether they will push for more profitability with the business structure left as it is (e.g., by raising rates), or whether they will push for more services offered to grow the business (e.g., expansion into new aspects of diving or new customer demographics). I expect they'll be looking at demographics and a bigger marketing effort in under-served areas such as China and India. Based on the questions I was being asked some months ago (these investment companies are similar in most ways), I don't imagine that the decision had anything to do with instructional philosophy, so I don't expect a standards shake up
.
What remains to be seen, in relation to the new owners, is whether they will push for more profitability with the business structure left as it is (e.g., by raising rates), or whether they will push for more services offered to grow the business (e.g., expansion into new aspects of diving or new customer demographics). I expect they'll be looking at demographics and a bigger marketing effort in under-served areas such as China and India. Based on the questions I was being asked some months ago (these investment companies are similar in most ways), I don't imagine that the decision had anything to do with instructional philosophy, so I don't expect a standards shake up
.
Tigerman
Contributor
If they could significantly increase their profit by doing so, I would believe it.
I dont believe they could though..
They're going interplanetary and looking to be the first SCUBA agency on Mars.
All they gotta do is find water up there.
Tigerman
Contributor
I suggest going for enviromentally sealed, quality cold-water regs though. Ive heard the temps up there can get a bit on the chilly side..
The article mentions that Scuba is a pretty steady industry. Either scuba pundits who say the industry is in decline are wrong, or the investment firm isn't thoroughly investigating things. Which is it?
My experience with PE buyouts from the perspective of a fund shareholder (not the fund that signed the deal, but still) is that the fund looks for businesses that have a solid product with a healthy demand but that have a company structure that is somehow limiting the growth potential for increased profitability. Sometimes it's a human resources issue; sometimes it's marketing and market reach; often it's financial planning and reporting, and maybe taxation. Whatever the issue is, the PE company has a team that works to develop the weak area so as to remove the limiting factor(s). For the most part, product development, R&D, design, etc. is not affected to a great degree, except in the way that budget realignments might cause (e.g., delay in rolling out a new, planned product). I don't expect major changes that affect the individual PADI instructor in the short term. I believe the product line will be maintained, at least for the time being, and of course the product line includes the curriculua. I don't think it's a question of "sucking dry" any acquired company, including PADI, but of course a PE company does have as its ultimate goal the reselling of the company at a significant profit in order to generate a good return on shareholders' investments. Unless a PE company can do this it cannot raise the next fund since potential shareholders will find a different fund with a better track record to invest in.
Well... As a general rule the big winners will be the PE company and the banks. Profit and Quality in the PADI system is already under great opposing pressure so I wouldn't expect that to change. The focus will be more on leveraging the debt now so I would expect more "spread sheet" management and possibly less interest (focus) on customer support, so if anything, quality will suffer even more than it has been.
So the big change I would expect on the short term will be slower or more impersonal customer support than we've had in the past.
In terms of diving instruction, I don't expect to see any external changes on the short term. At first they'll be looking at how to restructure the company both financially and on a management basis in order to cut out slack, improve cash flow, plan for leveraging the new debt and keeping costs under control. I don't know if PADI is due for management restructuring but my impression as an outsider is that some new blood may do some good, actually.
According to the article the big push will be into Asia. It doesn't say how much the investment company is putting into that expansion but they're going to want a return on that investment on a 5-7 year time scale. What I could easily imagine happening is that they'll split up the regional areas and sell them back to the market as (semi) independent franchises to leverage the debt they're taking on with the Asia expansion. This may *actually* have benefits because regional differences (and politics) could be better managed without a focus on strict uniformity across the board. I see this happening within 3-5 years ....
I would also imagine that they'll want to see PADI firmly established in Asia on the short term (+/- 5 years) so expect the company to grow in terms of market share. I think much of the marketing budget will go to that region so if you don't live in Asia I wouldn't expect to see much change. If you do live in Asia you may see PADI putting their stamp on everything in sight as a lot of money will be spent on controlling that pie. What I would expect to see emerging in Asia will be a "PADI" chain of franchise shops with a somewhat uniform looking client facing side.
If you really let your imagination go and gaze *deep* into the crystal ball then maybe we'll get this:
Depending on the results in Asia and how many of the pieces they sell back to the market in the process, you might see the emergence of a PADI chain of stores, PADI gear, PADI live-aboards, PADI resorts etc. etc. PADI already tried to do something along those lines with the 5-star resort thing but what I'm talking about isn't just buying the rights to use a logo, i'm talking about a migration to a brick-and-mortar type franchise construction. (ie like McDonalds). This might not even be too far fetched now that they have the financial backing to take the first step.
In fact, if they do go this way then I can foresee the manufacturers of diving gear having a panic attack because if PADI starts to exert *real* control in the retail market then you'll see a role-reversal whereby the manufacturers start to lose control over their dealership model. PADI could start to exert pressure back to the manufacturers by choosing 'partners', which could force a consolidation in the manufacturer's market and lower prices across the board to consumers as non-PADI dive shops will all be freed up to pursue a "Leisurepro" model, free of dealership rules, whereby the shops and not the manufacturers decide on pricing. Shops will no longer be dealerships, but simple distribution channels. Doing so will also mean that manufacturer's margins will shrink, R&D budgets, especially for non-PADI manufactures, will shrink (or disappear) and we'll see a stabilization of dive-gear form with innovations coming at a much slower pace over the long term. No longer able to compete on innovation, the manufacture's will need to streamline their production methods, which will mean that innovations will be made in *how* things are manufactured but consumer quality will remain, at best, the same.
R..
So the big change I would expect on the short term will be slower or more impersonal customer support than we've had in the past.
In terms of diving instruction, I don't expect to see any external changes on the short term. At first they'll be looking at how to restructure the company both financially and on a management basis in order to cut out slack, improve cash flow, plan for leveraging the new debt and keeping costs under control. I don't know if PADI is due for management restructuring but my impression as an outsider is that some new blood may do some good, actually.
According to the article the big push will be into Asia. It doesn't say how much the investment company is putting into that expansion but they're going to want a return on that investment on a 5-7 year time scale. What I could easily imagine happening is that they'll split up the regional areas and sell them back to the market as (semi) independent franchises to leverage the debt they're taking on with the Asia expansion. This may *actually* have benefits because regional differences (and politics) could be better managed without a focus on strict uniformity across the board. I see this happening within 3-5 years ....
I would also imagine that they'll want to see PADI firmly established in Asia on the short term (+/- 5 years) so expect the company to grow in terms of market share. I think much of the marketing budget will go to that region so if you don't live in Asia I wouldn't expect to see much change. If you do live in Asia you may see PADI putting their stamp on everything in sight as a lot of money will be spent on controlling that pie. What I would expect to see emerging in Asia will be a "PADI" chain of franchise shops with a somewhat uniform looking client facing side.
If you really let your imagination go and gaze *deep* into the crystal ball then maybe we'll get this:
Depending on the results in Asia and how many of the pieces they sell back to the market in the process, you might see the emergence of a PADI chain of stores, PADI gear, PADI live-aboards, PADI resorts etc. etc. PADI already tried to do something along those lines with the 5-star resort thing but what I'm talking about isn't just buying the rights to use a logo, i'm talking about a migration to a brick-and-mortar type franchise construction. (ie like McDonalds). This might not even be too far fetched now that they have the financial backing to take the first step.
In fact, if they do go this way then I can foresee the manufacturers of diving gear having a panic attack because if PADI starts to exert *real* control in the retail market then you'll see a role-reversal whereby the manufacturers start to lose control over their dealership model. PADI could start to exert pressure back to the manufacturers by choosing 'partners', which could force a consolidation in the manufacturer's market and lower prices across the board to consumers as non-PADI dive shops will all be freed up to pursue a "Leisurepro" model, free of dealership rules, whereby the shops and not the manufacturers decide on pricing. Shops will no longer be dealerships, but simple distribution channels. Doing so will also mean that manufacturer's margins will shrink, R&D budgets, especially for non-PADI manufactures, will shrink (or disappear) and we'll see a stabilization of dive-gear form with innovations coming at a much slower pace over the long term. No longer able to compete on innovation, the manufacture's will need to streamline their production methods, which will mean that innovations will be made in *how* things are manufactured but consumer quality will remain, at best, the same.
R..
Well, remember there is the recent change of making materials (e.g. PADI printed books) for all courses mandatory in 2013. That means specialties, all of the ones that do have materials available. It seems like a small little change. I believe it shows the trend in the last few years to maximize the profit through the "publishing" side of PADI. I find it retarded, old-school mentality; printed materials that are economically unfeasible in many markets are now being forced. Also makes small shops (like 80% of the PADI dive centers in the world) have to have an important stock of materials if they ever want to be able to cover diverse specialties. A true lack of regional distribution models (their model is "buy it from your IDC center, be it you are a small, medium shop or independent instructor). There is no real PADI regional office in most markets, customer service blows, and don´t even get me started with the required/mandatory materials. The videos are laughable and of very low quality (lest not forget how outdated they are). There is very little, if no reinvestment into updating materials that are forced upon instructors, shops and students. This applies to printed, video and even on-line materials. e-learning has been slow, expensive and with little to no incentive to actually replace their very outdated printed model. It´s all about maximizing profit in every aspect. And the profit is maximized from their own "clientele".
Sorry people, for those of you that still can´t see it, PADI is a pyramid scheme in many ways. It isn´t that different from Mary Kay Cosmetics. It caters to the lowest common denominator with el-cheapo seminars (e.g. Business Academy). Putting pressure on your own customers (shops, instructors) to maximize PADI´s profit will only end in lower and lower quality for the indirect end-customer (the guy that wants a course). The squeeze every cent out of the shop/instrucotr attitude PADI is showing by making materials mandatory on all the spectrum, is just making shop/instructor profits diminish to maximize PADI´s. PADI feeds out of it´s own customers without really offering them a growth path (except making more instructors, hence more customers for PADI, but less longstanding customers for the shop or instructor ... am I the only one seeing this?)
It´s crappy capitalism, pyramid scheme type. Push and sell instructorship to every DSD diver (almost, Im kidding here, but most IDC centers will package a GOPRo brochure with OW materials). Squeeze profit out of your own members, and don´t protect any market your members belong to. PADI will eventually tumble, that´s what I think. To understand everything that is wrong with PADI you need to be inside PADI (be a member, read, an instructor or shop). Once you are inside there is a substantial investment already laid out. Yeah, that´s why I won´t change agencies any time soon. In the end, Im an independent instructor that doesn´t have to survive off PADI or any agency. I teach because I like it. For the teaching I do, it doesn´t affect me that much all the PADI changes. But I think of the people that are PADI-locked and can only see their suffering from afar.
Sorry people, for those of you that still can´t see it, PADI is a pyramid scheme in many ways. It isn´t that different from Mary Kay Cosmetics. It caters to the lowest common denominator with el-cheapo seminars (e.g. Business Academy). Putting pressure on your own customers (shops, instructors) to maximize PADI´s profit will only end in lower and lower quality for the indirect end-customer (the guy that wants a course). The squeeze every cent out of the shop/instrucotr attitude PADI is showing by making materials mandatory on all the spectrum, is just making shop/instructor profits diminish to maximize PADI´s. PADI feeds out of it´s own customers without really offering them a growth path (except making more instructors, hence more customers for PADI, but less longstanding customers for the shop or instructor ... am I the only one seeing this?)
It´s crappy capitalism, pyramid scheme type. Push and sell instructorship to every DSD diver (almost, Im kidding here, but most IDC centers will package a GOPRo brochure with OW materials). Squeeze profit out of your own members, and don´t protect any market your members belong to. PADI will eventually tumble, that´s what I think. To understand everything that is wrong with PADI you need to be inside PADI (be a member, read, an instructor or shop). Once you are inside there is a substantial investment already laid out. Yeah, that´s why I won´t change agencies any time soon. In the end, Im an independent instructor that doesn´t have to survive off PADI or any agency. I teach because I like it. For the teaching I do, it doesn´t affect me that much all the PADI changes. But I think of the people that are PADI-locked and can only see their suffering from afar.
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