Acquisitions Anonymous - #1 for business buying, selling and operating - Should we get wet with a water park? - Acquisitions Anonymous Episode 118

Episode Date: August 26, 2022

Michael Girdley (@Girdley) and Bill D’Alessandro (@BillDA) talk about a really fun deal as we go all the way to Port Macquarie, Australia to check out a water-inflatable theme park for sale. This one seems like a great place to take your kids and not only that, we also look into whether it's a great place to park your money.-----Thanks to our sponsor!Live Oak Bank - Whether you’re looking to build, buy or expand your business, let the team at Live Oak Bank be your financial guide. With Live Oak, you get a partner who believes in your success and is willing to take the journey alongside you. We provide small business loans tailored to your goals.Fuel the growth of small businesses across the country; bank with Live Oak Bank.You can contact Heather Endresen, Director & Founder at [e-mail]. Mention this podcast in the subject line and ask her about office hours to get in touch.*Live Oak Bank is the #1 SBA 7(A) Lender. The data supplied by the SBA reflects 7(a) highest dollar volume during FY 2021.-----Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel.Do you enjoy our content? Rate our show!Follow us on Twitter @acquanon Learnings about small business acquisitions and operations.-----Show Notes:(00:00) - Introduction(00:26) - Our sponsor is Live Oak Bank(01:32) - Deal: An aquatic amusement park in Australia(03:38) - What is so interesting about it?(05:23) - Let’s dig into the financials!(08:24) - What is the one big problem with this business?(09:52) - What would Bill ask the operator?(11:20) - How hard is it to wrap your brain around the liability in this deal?(13:09) - Girdley’s favorite: Is there pricing power here?(13:54) - How’s this different from a ski rope resort in terms of capability?(15:26) - Have you seen the Manager’s residence? It’s so cool!(16:28) - Who’d be the right person to acquire this business?(18:36) - Let’s break down the infrastructure here: What should you ask?(19:54) - Win a Chili's Gift card from @Girdley!-----Additional episodes you might enjoy:#108 A fireworks store and a ski rental business for sale#106 A Pet Product and Saas business for sale - Which one do we like?#Subscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

Hey, everyone, it's Bill. Welcome back to another episode of Acquisitions Anonymous. This week's episode is super fun because we go down under all the way to Australia to review a water inflatables theme park for sale. This one looks like an incredible place to take your kids. We dive into whether it's an incredible place to park your capital. So a fun episode this week with Michael and I, but first, a word from our sponsors. This episode is sponsored by Live Oak Bank, the number one SBA lender in the country by dollar amount. But they're more. than the top SBA lender, they also provide USDA and conventional financing, tailoring each loan to their customers' unique needs.

Whether you're looking to buy or expand a business, let Live Oak be your financial guide. With Live Oak, you get a partner who believes in your success and is willing to take the journey alongside of you. Live Oak's M&A financing experts lend across many industries nationwide. They also have over 30 industry-specific teams whose lenders are experts in industry-specific small business loans. Some of these include health care, seniors housing, and service contractors as well.

With their dedication to efficiency, collaboration, and in-depth knowledge of M&A financing, they'll take you where you need to go. Visit liveoakbank.com slash a-a, and make sure that's a lower-case a and another lower-case a to connect with a lender today. So again, that's live-oakbank.com

slash AA with two lower-case a's to find out more about Live Oak and to connect with the lender there and tell them that the acquisitions anonymous folks sent you along. Thanks a bunch. All right. We have a very interesting deal.

And this, if you do not follow us on YouTube, this is the week to pick up following us on YouTube because there are some gorgeous pictures in this sim that we're going to review. Stoner Park. Stoner. Oh, wait. Too soon. Too soon. So this week's deal is called Stoner.

I mean, Stony Park, which is an aqua and holiday part in Port Macquarie, Australia. A huge hat tip, hat tip to one of our listeners who sent this in. This is the most gorgeous sim. He said he'd not sign an NDA so we could show this on the show. This is the most gorgeous sim I might have ever seen, especially for a business this side. It is clearly done by a graphic designer. And there are amazing photos in here because what Stony Park is, is it's situated on a river. Floating in the river are what look like a winding course of probably three

hundred yards of inflatable jungle gym style water cannon diving board blob things that you kind of go through for fun and time, I would imagine. It is coupled with the same thing on land, like this inflatable obstacle course, slide American gladiator's style situation. You kind of have to see it to appreciate it. So hop over to our YouTube or I'm sure you could Google Stony Park, Australia. To interrupt Bill. I love this one picture, which is totally accurate. They have this picture of, you know, there's this thing on the lake, which is like this giant floating bouncy castle thing that's maybe like a half mile long.

Like this thing's enormous. And then above it is a picture of like 60 kids that it looked like 10 year olds sprinting into the water. Like the most, this is totally accurate, by the way. I took my son, who's 13 to one of these. And they had an accident on it while he was in it on it. I had to shut it down. My son was mad for like a week because he only got 10 minutes out of the 60.

Anyway, we'll get back to that. It's one of the problems with this business. So this thing looks like it would be exceedingly fun for a child and probably even for an adult. So it has been established since 1999, Stony Park is primary focus is to create a world-class man-made water sports facility with complimentary accommodations. So you can actually stay also at Stony Park, do this all day, and then come back. back and collapse into bed in your cabin and do it all over again. It is situated on 50 H.A., which assumes hechtakers. Heckers.

Yep. And purposely developed over the years. Stony Park is a multifaceted theme park business includes the Aqua Park, the water ski park, and short-term accommodation, which is comprised of cabins, villas, and campsites, also food and beverage kiosk, and is soon to be launched Action Park, which is the inflatable land-based course I mentioned earlier. So again, you've got to kind of see the picture. This is located in the highly popular mid-north coast of New South Wales, one of Australia's top tourist destinations.

It is strategically positioned midway between Sydney and Brisbane. It can 15-minute drive to Port Macquarie, a major regional center. This is a prime opportunity for an incoming purchaser to acquire an already strong-performing business, plus capitalizes substantial potential for further revenue generation in a prime tourist location. It says it is for sale via an international expression of interest campaign, which closes at 4 p.m. on 24th of August, 2020. So this is in market right now. August 2020, you can bid on this on Stony Park. A couple more details.

There are six cabins slash villas. There are three bunk houses and there are 21 powered campsites on the lot. The combined turnover is 1.2 million turnover being international for revenue. typically, and their NOI is $377,000. I'm kind of shocked it's not more because I don't know how they built this facility on NOI of only $377,000. So these, just not to interrupt, these are Australian dollars or they have to be. So I'll translate that to U.S. dollars. One Australian dollar is 0.7 U.S. dollars. So. Okay. Thank you. So take 30% off all these numbers. So 1.2 million is actually closer to 900,000 U.S. dollar.

Okay, so even smaller. So it's $250,000 to $300,000 U.S. dollars in net. What I'm taking away is that these inflatable things are not that expensive, which is kind of cool. You don't need a ton of capex to build and rebuild your course. So this seems extremely cool. They've got some data about tourism in the New South Wales area. This is a huge tract of land. I mean, I don't have a sense for how big kind of 50 hectares is, but to give you a sense, You know, if you're listening, this would be, you know, just from looking at the aerial photos, like the size of a shopping mall, you know, like a small shopping mall, not a strip mall, like a small shopping mall, I would think. And it's got two what are clearly manmade, uh, long strips. It looks like a section of a river. One of which is where the inflatables park is and one of which is where they do the power sports park, uh, with the boats and stuff. Uh, yeah, Bill, one, one hectare is two and a half.

acres basically. So if they're 50 hectares, that basically means 125 U.S. acres, basically. U.S. acres. Perfect. Thank you. So to get into the financials of this, their revenue in 2018 was 930,000. 2019, it dropped to 762. 2020 was COVID year 611, but then it bounced right back in 2021 to 986, which is higher than it was in 2018. So you like to see that. Their profit was went from 261 to 245. And then in 2020, it actually jumped to 303. They must have been able to cut expenses when their revenue dropped.

And then this year it's 362. Again, Australian dollars. They've got a number of adbacks on here, which are a little bit tough to parse. Michael, did you have any success parsing these adbacks? Nope. It seems like they've got it. structured in like a property trust, like the land is held separately. And I assume there's liability reasons for this.

So you'd have to kind of unpack that. They also say they've got all these development plans to do a water ski park. They got great Google reviews. It's in a strong market. And the broker says that they're going to run like a real process here with IOUIs and and bid dates. And they call you out and all this stuff. So Michael, what do you think about this place?

I would like to go there. It seems cool. Dude, I would love to go there. I think the problem is, you know, we've talked about kind of these type of things, like whether it's this, this is a retail business when it comes down to it. The problem is this is out of the middle of nowhere, like literally nowhere. Like, it's 20 minutes outside of Port Macquarie, which is not a huge town as far as I know. But then the bigger problem is like, you know, for the people that are coming from Brisbane or Sydney, it's four hours drive between each of those. Like, it's just, it's just out in, it's,

you know, I think if they had put this level of infrastructure within an hour's drive of Sydney or an hour's drive of Brisbane, this would be a totally different business. But these guys decided to create their own personal water park paradise out really in the middle of nowhere. And, you know, if you're going to be taking your kids here, which this seems like eight year old to 14 year old boy or girl, like heaven. Like above that, my 15 year old has no interest. Below that, I'm going to be worried about my seven-year-old not coming up from the bottom of this lake.

But like that kind of, that kind of trip, like, are you really going to go drive four hours to stay in a shack and let your kids do that? Like, it's just, man, I wish they would just take this and they would just put this outside of Charlotte or San Antonio because I think the turnover would be five to ten times what this is. Like, this place would just be absolutely packed if it was near San Antonio. Yep. I wonder how busy it. Like, this is the question I would ask the operators. Like, what is your capacity? How many people can you put through this infrastructure every day? And how many do you actually put through it every day? And I guess that's why they got the houses on site, right? Because it's probably so far away, it's convenient to stay if you're going to make the trip. Yeah. I think that's actually totally right on. Well, I have seen, you know, and I pulled up here on the screen, this kind of floaty bouncy castle thing in a in like a calm lake. It's a freaking great business. I took my son to one, as I mentioned earlier, when we were up in Montreal,

and they have one in this lake, and you pay whatever, $20 to let your kid go bounce around for an hour, and they were just shuddling through kids. They had 15 or 20 kids on there per hour, and then, of course, what happened was the kid? My kid was on there for 10 minutes, and then some kid managed to hurt themselves, and then they shut down the whole thing for the next hour, and we had to go because we had to go make an appointment. And, but like, they were just pushing people through. But the difference between that and this is there were seven million human beings living in Montreal, all very excited to have their 12-year-old go do this while they sat and drank mitis around the corner. This, again, you come back to the problem. It's like, where the heck is this?

It's just location, location, location. It just doesn't work. But it should be a great business. It just drives me crazy. Yeah, well, it also illuminates the other thing that you got to be aware of in this business, which is liability. You know, you've got a whole bunch of kids bouncing and then break in their necks. You better make sure your insurance situation is all tied up. These people look like they've done it right.

They've got everything in various interwoven trusts. So when Timmy's parents sue you, you don't lose the whole thing. It's which, but like that's just a bummer. Like, you know, periodically a kid breaks his neck at your facility. Like this, when you put enough kids through it, like this happens every year. you know, which is kind of part of just doing business in this industry. I mean, I don't know, I don't know anything about the liability and tort kind of laws in Australia. Hopefully they're not as bad as the United States.

But, you know, looking at this, I mean, they're pulling out, what do we figure out? They're pulling out, $150, $200,000 apiece out of this, or total out of this thing. Close to $300. Close to $300. I mean, in the U.S., your liability insurance on this is probably $50 to $120, depending on, like, what's going on. I don't know what their history with injuries are, but, you know, this is a situation where your, your liability is going to just eat you alive, just eat you alive on this stuff. Yeah, you would think.

But I do like, I mean, this place is, it's huge. I mean, you can, you would look at it and go, wow, like this must be a whole facility. But then you look a little bit closer and you realize that if you let the air out of this stuff, you could like pack a whole thing up like a carnival in like a week. You know, it's like, yeah. The logging is basically mobile homes on permanent foundation. foundations, and all the activities are inflatable, which is kind of cool. Like, really, the only thing that they've got here that's, I would call permanent,

is the water feature, which does appear to be manmade, that they dug it out and filled it up with water. So, I mean, I don't know if there's like a version of this that can be on wheels. That would be interesting. It is interesting also looking, just some tidbits looking at the sim here that are very interesting to me. You read the quotes that they have in here. and by the way, most beautiful Sim ever,

like it wins the award for whatever the award is for acquisitions. But like the number of people that are listing these quotes and they're like very affordable, very cheap, makes me think that, you know, especially since these guys are owner operators, they've been attracting and not wanting to price it out of the market for a lot of people. So there could be a situation here to bring more money in. But if you have kids and you're driving four hours or someplace like this,

you know, it's, you're targeting a bunch of, A budget-centric kind of customer. So you may not have much in the way of pricing power. Another thing that's really interesting here, Bill, and we should talk about the merit of this. They have a bunch of stuff here as plans where they want to do like the tow rope-style ski park. I don't know if you've seen those, but it's basically a bunch of towers where they run ski ropes behind it and you can ski 24-7 without a boat. Have you seen those things? Yeah.

Yeah, they're very cool. It's like a ski lift, but for water skiing, sort of. Totally. To lift, but for water skiing. Yeah, there's there is one here near San Antonio. I have never gotten the sense they're doing very well for the capital investment they have. And they're just they're just an expensive thing to run. Because you can only you, it's not unlike a ski lift, right? Where you take people to top of the mountain, takes you 12 minutes to do that. And then they can keep they ski down on their own. You don't have to, you don't you don't have to pay to put energy into them while they ski down the mountain. These toe ropes like you can only do three or four people at a time. So you've got the, that many people going in a circle and then hopefully they ski and then you move on. Whereas a to, I mean, a ski resort, high speed lift, you know, you're funneling through five people every couple seconds.

Big, big difference in terms of kind of your throughput ability. Well, it says on here that they projected it would cost 550,000 Australian dollars to put it in. And their pro forma shows a gross profit of $600,000 in the first year of operations, which shocks me, considering that would be double the, gross profit, or at least the net profit of the entire existing operation. The other thing, well, I don't want to keep pooping on this because it's so cool. But the other thing that's really interesting here, I don't know if you saw it, but the

pictures of the manager's residence, and I just pulled this up, it's really nice for some people that were making a couple hundred grand on this thing. And here's how they describe it. The manager's residence is located well away from the activities and tourist components of Stony Park, setting atop a hill and overlooking the two lakes. The 430 square meter architecturally designed house comprises four large belled rooms with built-in robes, which I guess are closets in American English, three bathrooms, spacious open living areas, and then they have this picture of this thing, and it's really, really nice.

Like, somebody has made this their retirement paradise, and along the way. way, you know, added the world's most amazing bouncy castle. Yeah, that's about 4,600 square feet by way of nursing. So, like, that's a nice, sizable house. It's got a four-car garage overlooking a lake. This thing is sick. But that may lead to who the right buyer is for this. And again, I think you and I are starting to see a lot of these businesses where it's like,

well, this doesn't make sense for anybody unless it's a lifestyle purchase. like somebody who wants to go live in BFE, Australia, and to them being an in-and-out kind of social person, helping, you know, the guests come in and being excited and hosting them and managing your local staff and going through all those problems. And that being your lifestyle seems pretty darn good to me. Seems like a good fit for them. For you or me to buy a subscale amusement park, which is basically what this is, resort in Australia, we should have our head examined.

Yeah, I'm not doing this. Some Australian that lives in the area, though, should definitely do this because I can see this being a great life. I love also how they're like, you get 125 acres. And, you know, like, as a city person, that's a lot of land, right? I'm like, wow, that's a big tract. And then you look at this picture and you look at the compound and then you look behind it and there's nothing for like miles.

There's just trees and grass. It's like, oh, land is not at a premium way out here in BFE. The other thing, and I don't know if you saw this bill, they have an aerial photo. Let me see where I can pull it up of the entire site. And then a lot of the water looks like it's taken from a lake or a river that goes nearby. And it's interesting how much nicer the water looks in these manmade lakes than the stuff going down the little river, which looks like the kind of black, basically sewage refuge, I would think, sewage outflow. And then once they get the water into these little lakes, it actually turns out to look pretty nice.

Yeah, well, it says pumps, generators, oxygenation, diffusers, and power throughout the site. So they're definitely treating this water. Yeah, you've got, well, look, I mean, this Australian river water here. Look at this. Look how brown that is. That's crazy. Delicious. That's nasty.

that's nasty so I mean I think that's the other thing about this like if you're going to be the type of victim to sign up for this I mean look at this look at how much infrastructure they list here I mean this is insane lakes solemn course covered ski docks colored tournament stop blocks boat ramps a two-wheel drive Nissan Yute a Mitsubishi Yute a rodeo Yute water pumps 40 air pumps 40 air compressors

like you are going to have two people on staff all the time just changing the oil on these things like this is just this is just a lot of maintenance for what kind of revenue you're getting and it looks like brings up the point you should ask very detailed questions about the SOPs in any business you buy but especially in this one I mean because you could totally see that no one knows the the peculiarities of air compressor number seven you got to kick it three times before you pull it, right, to get it to go, except the owner, right? And like, compound that across this entire list. Their aluminum punt weed cutter, there, I don't even know what that is, a weed spray or a dual axle car trailer, the high flow water pump, the PTO water pump, all that stuff, right?

Like, if this stuff is not, not documented, but I, which I guarantee you, it's not, you're going to have, you better have the prior owner's cell phone number. So if anybody looks at this, I will give you a prediction. And if I'm wrong, Hit me up. I will send you a Chili's gift card. I bet you dollars to donuts. There is a guy with the worst Australian accent ever who's about 65. He's been working there for 15 years and he's the only one who knows how all this stuff works and it's all on his head. Yep, for sure. And his name, that guy might not even be the owner. He sounds like Crocodile Dundee like on helium while drunk. Like that's what the guy sounds like. So you got to make sure that you got to find out who that guy is,

but I guarantee this business has a guy like that, and it's the only reason the place doesn't fall apart. For sure. All right. Well, we might not be buying it, but if I'm ever in New South Wales, I might be going to visit it. Yeah, if you have five extra hours to drive someplace,

it's like in the middle of nowhere. This is so adorable, though. I really want to take my son here, except I can't carve out the four weeks it will take to get there. This is crazy. Anything else here we missed? Man. I don't think so. It's cool to see. I mean, there's there are all kinds of businesses out there in the world. Thank you to the reader that sent this in. If you are the listener rather, if you are listening and you see cool, fun deals like this, please send them into us. We would love to talk about them on the pot. All right. That does it for another bangor episode of Acquisitions Anonymous. We will see you guys next time.