The chief executive officer of Forest River Inc. made a bold prediction about two months ago at the RV Industry Breakfast in Elkhart.
Pete Liegl predicted Forest River and Thor Industries would grow to each account for 40 percent of recreational vehicle sales nationwide.
Though both Elkhart companies are growing, they’re no longer neck-and-neck competitors. Thor’s recent $576 million purchase of Middlebury-based Jayco Inc. has cemented its position as the industry’s largest RV manufacturer; Forest River, owned by Warren Buffett-led Berkshire Hathaway, has become a distant second.
Jayco, which was owned by the Bontrager family since 1968, is just the latest example of a company accepting a buyout offer to join a larger one. Such consolidation has become increasingly common in the industry, the South Bend Tribune reports.
Taking advantage of record sales, big RV manufacturers, suppliers and dealers are snapping up their smaller competitors. Those sellers are cashing in on the industry’s prosperity, knowing that massive payouts probably won’t be available when the next downturn hits.
The industry’s rapid consolidation has also brought economic perks, according to Mark Dobson, CEO of the Economic Development Corp. of Elkhart County.
In most cases, millions of dollars from such transactions will likely be injected by sellers back into the local economy, Dobson said. “I believe a significant portion of it will continue to circulate in the marketplace long after exit strategies are done,” he said, adding that sellers might use the money to launch other businesses, for example, or to make charitable donations.
And for employees of companies that are bought, Dobson said, joining larger companies likely will mean better job security when the next recession hits. Employees might also have more opportunities for career advancement.
‘Good time to sell’
For entrepreneurs who launched small RV companies decades ago, now is an ideal time to consider an exit strategy, said Matt Rose, director of RVs for the Indiana Manufactured Housing Association, Recreation Vehicle Indiana Council. Those owners realize the industry’s rapid growth will eventually come to a slowdown.
“They think it’s a good time to sell because the bigger guys have the resources to buy the company. Two years down the road, things might drastically change and no one’s going to want to invest,” Rose said.
By adding Jayco’s market share over that period, Thor and its many subsidiaries would account for nearly 50 percent of all RVs sold nationwide. And the data also suggests that about 83 percent of the market is now dominated by two companies.