Two friends look to the future
By David Hubbard
One year into AAA Holdings, All Aboard America! and Calco Hotard have no regrets
It has been a year since the stress and strain of keeping a family business together eased from their shoulders, ridding the owners of further risk and worry about the future of their time-honored companies. What to do next for two family-owned motorcoach companies approaching 80 years in age had been a concern for longtime friends Jack Wigley, president of All Aboard America!, Mesa, AZ, and Callen Hotard, president and CEO of Calco Travel and Hotard Coaches, New Orleans, LA.
“All Aboard America! spans three generations,” says Wigley. “The fact remained there would never be a fourth. There simply is no one else in our family with the inclination or desire to lead a transportation company.” Hotard found himself in a similar situation.
“While there is immense satisfaction in running a family business that I have been involved with all my life, it comes with considerable risk,” he says. “There is a lot of liability out there. Jack and I were both looking for a way to keep our companies alive, move forward and still remain in the business.”
Wigley and Hotard had been weighing all possible options together and separately for several years once the topic of succession planning was discussed in their Spader 20 Group.
“I was looking for something to happen fairly soon,” says Wigley. “To be honest, I had been personally guaranteeing notes and loans since I was in my 30s, and once I reached my 50s I started to think more about how much longer I wanted to deal with this degree of risk and responsibility. For me, the next step was just not there. If anything happened to me, I could only look forward to a real mess on my hands.”
Another option would have been to hire on an outside president and CEO. “That would not resolve the future ownership issue, nor necessarily reduce the risk,” he says. “Besides, the process could take a while. I may not find the right person the first time around.”
The notion to turn the company over to longtime employees to operate as a co-op was quickly dismissed. Putting their heads together, the two eventually hit on the idea of merging their companies as a package to market to investors.
“Our aim in marketing our two companies together as one larger entity was to attract a higher quality investor,” says Hotard. “We didn’t believe either of us could achieve that on our own.”
Enter Celerity Partners
With the help of a business broker, their thinking led them to Celerity Partners, a private equity firm based in Los Angeles, CA, dedicated to recapitalizations and proactive acquisitions. This transaction marked the firm’s first foray into the transportation industry. Celerity says it liked what it saw in these particular operators enough to draw their interest in a new area.
“We see All Aboard America! and Calco Hotard as two of the finest assets in the industry,” says Celerity Partners representative Matt Kraus. “They demonstrate dominance in their local markets, and their management teams show terrific depth and expertise. Together, these two companies provide the size and scope to serve as a platform to build a much larger and formidable motorcoach company.”
Celerity Partners felt from day one this transaction was a cultural fit, a quality Kraus says no one should ever underestimate when the plan is to acquire and integrate multiple companies.
Though the motorcoach industry is new for the firm, Wigley and Hotard’s concerns for their family businesses are not a rarity for Celerity Partners.
“The impetus for transactions like these is often owners looking to diversify their net worth,” says Kraus. “More specific to this industry, the transaction has also allowed the Hotards and Wigleys to be freed from daunting possible liabilities.”
Celerity Partners says it now has a greater appreciation for just how challenging it is to build and manage market leaders in this industry. Kraus says the firm certainly realizes the outstanding market opportunity to two best-in-class operators.
“This was the only solution that made complete sense,” says Hotard. “We needed to simply divest ourselves of our majority stake in our companies.”
Through the involvement of Celerity Partners, Wigley and Hotard were able to do just that. Each accepted a minority share of the newly formed parent entity AAA Holdings.
“We had a lot of questions going through the due diligence,” says Wigley. “Having never been through it, I found the process a little nerve racking. Frankly, I didn’t know how I would feel once this deal closed. As it has turned out, this is the difference between me sitting alone in my backyard trying to come up with the right answers, as opposed to now being able to voice my ideas in the boardroom in the company of partners.”
Neither partner is expressing any regrets. “We both continue to be in charge of our own operations,” says Hotard. “On the same hand, this also introduces us to a whole other sector of business. It takes us to the next level.” Everyone involved agrees it has turned out to be a win-win solution.
“We might have combined a few back office functions, but we still maintain our own brand identities,” says Wigley. “Plus, we keep our own employees and crews on board, many of who have a vested stake in these older companies.”
As they grow more comfortable in this arrangement, Wigley and Hotard are enjoying the chance to explore new opportunities to grow beyond their boundaries, possibly integrating other companies into the entity.
In the meantime, the merger and acquisition has brought All Aboard America! and Hotard even closer. “When we agreed to join forces, we really didn’t think about doing business together because of the geography,” says Hotard. “However, in that respect, it has really been working to our advantage.” As it turns out, both operators are seeing for the first time where their respective operations actually overlap, and how they benefit as partners.
There have been opportunities for All Aboard America! to relieve Calco Hotard drivers on their way to California. Pinched for time with a new contract, All Aboard was able to call on Calco for five coaches to handle the business in a quick turnaround.
Praises from Prevost
AAA Holdings initialized its acquisition of the two companies with its first purchase of 10 H3-45 Prevost coaches — five for each entity. Prevost, Sainte-Claire, QB, Canada, noted in a statement to BUSRide that it regards the new company for making an important step in the industry.
“Prevost is honored to be involved with AAA Holdings and proud to deliver the first motorcoaches to this highly regarded union of motorcoach brands”, said Dann Wiltgen, Prevost vice-president of Key Accounts. “We are looking forward to a mutually beneficial relationship we know will have a positive and long lasting influence on our industry.”