Selling a Maritime Business

Jun 7, 2016

In early June 2016, a christening ceremony was held in Seattle to celebrate the conversion of the 233 foot United States Naval ship, John McDonnell, into a state of the art fishing vessel named SeaFreeze America operated by United States Seafoods. Seattle is well known for being the home of Microsoft, Costco, Amazon, Starbucks, and Boeing, but it is also the “winter” port for a significant portion of the Alaska fishing fleet and along with Tacoma & Portland, a major cargo port for facilitating export & import activity with Asia. This marine business activity when combined with the vibrant personal watercraft culture that exists from the Columbia River to the San Juan Islands creates an often overlooked, but significant component of the Pacific Northwest economy.

IBA, as the oldest business brokerage firm in the Pacific Northwest, has a 40-year reputation for successfully facilitating business sale transactions involving privately held companies that serve the fishing, cargo, and pleasure boating communities. The sale of maritime businesses has many unique characteristics that require experience, knowledge, and employment of “best practices” throughout the sale process.

The first characteristic related to selling a marine business, especially in the fishing or cargo industries, that needs special attention and carefully orchestrated processes & procedures relates to the marketing of the business to potential buyers. The fishing & cargo industries in the Pacific Northwest are tight knit communities where interesting information travels quickly. The task when selling a business in these industries is to get the information that a business is for sale in front of potential buyers while making sure that the information is only distributed to parties that have the motivation & capability to complete a transaction. IBA’s experienced & knowledgeable team of business brokers, all employ a multiple tier non-disclosure agreement process when distributing information to potential buyers that puts the proper infrastructure in place to protect ownership from the information a business is being sold being broadcast publicly prematurely. The sale of a marine business is very different than the sale of house where a sign is put on the front lawn advertising its availability for purchase and only should be entrusted to an experienced intermediary with the ability, knowledge, and experience to successfully facilitate the transaction and protect ownership’s interests.

A second characteristic related to selling a privately held company serving the fishing or cargo industry is that the customer base may be more diverse than one would believe at first perception. It is common & prudent for buyers of businesses to investigate the level of revenue concentration in one or a few customers. A high level of revenue concentration in one customer translates into increased risk in the transfer of ownership and future operation of the business. In Seattle, this type of concentration often exists with companies that serve the aerospace industry and Boeing. A high concentration of revenue in one or a few customers, does not necessarily translate into a price reduction for the seller or problems for a buyer in the future, however it is an issue that should be disclosed & discussed between parties in a transaction, so deal terms can be incorporated into the transaction relevant to the situation that are fair from all perspectives. The unique variation to this situation that often occurs in the maritime industry is that a customer may exist who owns and/or operates a fleet of vessels. In this situation, the decision maker and end customer is often not the corporation that owns or operates the vessels, but the captain of the ship who runs the boat like a small company. It is common for individual captains & ship engineers to have favorite electrical, refrigeration, HVAC, or other service providers and not take leadership from corporate on the best ways to maintain their vessel. A prudent business owner will develop relationships with both corporate and the individual ships in the marine industry. A review of a customer concentration by a business buyer should consider who makes the purchasing decision as a maritime corporation with fifteen vessels can be looked at as easily as fifteen customers as one.

One attribute of IBA, which is not universal of all business brokerage firms in the Pacific Northwest, is that we are also a commercial real estate company and have the ability to comprehensively represent a client in the sale or lease of their property along with their business. The sale of a property in a marine environment has unique characteristics in terms of property valuation and administrative processes associated with the transfer of ownership. It is “best practice” in negotiations to have a lead negotiator as a hub for communication, strategy, and negotiations. IBA serves that role working collaboratively with our clients, legal counsel, and accounting professionals in the transactions we facilitate involving privately held companies. The ability to obtain mergers & acquisitions and commercial real estate guidance from one knowledgeable & experienced individual is one reason marine business owners who also own the real estate associated with the operation of the business frequently select IBA for representation.

If as the owner of a business serving the maritime or pleasure boating industries you are considering putting in place an exit strategy plan to set sail for the destination of retirement, we would welcome the opportunity to meet with you and discuss the services we provide our clients. We maintain a buyer database of companies & individuals looking to acquire businesses in the marine & pleasure boating industries, hold all communications in strict confidence, and have completed transactions in the niche in 2016.

IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media and the mergers & acquisitions community on confidentiality and any other subjects relevant to the purchase & sale of a business.