Shifting plans due to the pandemic
By Connie Lannan

Shifting plans due to the pandemic

Party and event rental operations point toward recovery

Many party and event rental operators were having a banner year in 2019 and poised for even more growth in 2020. When the coronavirus (COVID-19) pandemic hit, forcing the cancellation of almost every conceivable event, these operators saw their bottom lines fall out from under them.

The inability to know exactly when this market will return to somewhat normal revenue levels has created great caution in this rental segment. That has wreaked havoc on the plans of those who were looking at entering and/or exiting the market.

“In terms of the party and event industry, I feel that now is not a good time to enter or exit,” says Gary Stansberry, president, The Stansberry Firm, Boerne, Texas. “With what has been going on this past year, there is too much uncertainty in the market. I would severely caution anyone thinking of entering the industry unless you have a solid niche that is COVID-19-resistant. We need stabilization. We need 12 months of non-COVID-impacted revenues to make that industry attractive as far as entrance or exit. You would not get much in the way of financing to enter or sell. I would not recommend selling unless you are in a have-to-sell scenario due to health or financial issues. We are 12 to 24, maybe 36, months away before I would consider either one of those options regarding the special events industry.”

Ed Latek, president, Latek Capital Corp., Lake Forest, Ill., agrees that it will take time for party and event rental businesses to rebuild their value.

But even though “the collateral damage on the event side will be horrendous, by summer we’ll start to see a return. However, we don’t believe this will be a V-shaped bounce back, but rather a continuous long-term return to normal. Unfortunately, I do believe we will lose some event rental firms in the process. For those who ‘battened down the hatch’ when COVID first came on the scene and continued to operate by ‘expecting the worst and hoping for the best’ during the ensuing year, they will be in an opportunistic position going into 2022. Clearly, some businesses will go by the wayside. Others, who maybe didn’t go by the wayside have none the less been seriously wounded, resulting in a business that loaded up with debt to stay afloat. As a result, those who remain in good financial condition should be in an excellent position to expand both organically and via strategic acquisition,” he says.

John Haener, CPA, president, Vendo Rental Solutions, Rockford, Mich., was working with a number of clients pre-COVID-19 who “were on a path to closing at values that made sense to them. When COVID hit, all of that went sideways,” he says.

“We have been able to work with some clients that exited at values that were significantly less. That is what they felt was best for them at the time. Other clients have put a hold on any type of sale process. Post-COVID, we see signs of improvement, certainly with smaller operators at a local level. They are coming back a little quicker than the larger, corporate-focused businesses, but there is a lot of work to be done,” Haener says.

“Hopefully, with the vaccine moving forward on the COVID front, we will see an uptick in the economy. That will allow these operators to continue to demonstrate a return in revenue. If we can see optimistically this return of revenue, even before we get to a full return of where we were in 2019, there is an opportunity to demonstrate that the downturn was directly tied to COVID and was a one-off, non-recurring event. That will help some of these businesses wanting to get on a path to selling to do so sooner rather than later. Until we see that return of revenue, a greater comfort level of COVID getting behind us and the economy returning to where it was, it will be a challenge for these types of businesses,” he says.

Even a difficult market hasn’t stopped people from expanding in this area, according to Dan Crowley, founder and president, Peer Executive Groups, Coopersburg, Pa.

“We have seen more activity than ever before with the buying, selling and expansion of party and event rental operations. We see that there are event operators who are looking to acquire their competition and acquire businesses around their marketplace. They feel the price will never be better. If they have the ability to do that expansion, then they are growing. A number of our members are growing, and that is what their decision has been,” he says.

Equity investment firm Dubin Clark & Co., Jacksonville Beach, Fla., has been a major investor in party and event rental businesses for several years.

“We own five rental companies in the event space — CE Rental, Marquee Event Group, InProduction, Peak Event Services and SmartSource/Abcom Rents. We had five previous investments that we built up and ultimately sold,” says Brent Paris, managing partner.

He is quite optimistic about the future of the market. “The last time I looked at the public stock of Live Nation, one of the largest venues for concerts and live events, it was at a record high. They have had losses for the last three quarters. Even in the public market, the tide has turned, really betting on the recovery,” he says.

Because of that, Paris is “actively talking with new potential companies to partner with. We think the market will come back in 2021. Most of the people we are talking to now feel it will come back somewhere between summer and fall. We are looking at some who want to exit. They won’t get a premium valuation today; however, more of the conversations we are having are about putting in additional capital to shore up the cash flow shortfall that the company is having. We would come in to own 51 percent instead of 80 or 100 percent, with most of the capital staying in the company,” Paris says, adding that he sees more consolidation of this this side of the industry in the near future.

Overall, Paris is quite “bullish” about the return of the market. It is just a matter of time before party and event rental operations stop bleeding red ink and can return to the black financially.

Connie Lannan

Connie LannanConnie Lannan

Connie Lannan is special projects editor for Rental Management. She helps plan, coordinate, write and edit ARA’s quarterly regional newsletters, In Your Region. She also researches, writes and edits news and feature articles for Rental Management, Rental Pulse, supplements, special reports and other special projects. Outside of work, she loves to bake for others, go for walks with her husband and volunteer for her church and causes she believes in.

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