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Event and party rental experts comment on the outlook for the recent acquisition of Classic Party Rentals, which filed for Chapter 11, by Apollo Management Group.
Classic Party Rentals, headed by CEO Jeff Black, has been acquired by Apollo Management Group.
The news last week that party rental giant Classic Party Rentals, No. 1 on the Special Events "30 Top Rental Companies" list, has found a buyer brought a wave of reaction from longtime event rental experts. Opinions on the outlook for the purchase vary, with some saying that—with debt stripped way—Classic has much to offer, while others question the company's core "rollup" philosophy, whereby a central headquarters operation can successfully manage rental operations across the U.S.
Mike Berk, head of M&M The Special Event Co. of Chicago and Dallas, says that the purchase—by Apollo Management Group—"if accepted by the court--and I've heard that some of the creditors are already objecting to the deal--Classic will be operating under their third investment firm. There is no evidence that they will fare any better now than they did before."
And why is he cynical? "The event business is difficult to run from a central office and adhere to corporate philosophies," Berk says. "Decisions need to be more subjective and made in a timely manner."
The shedding of Classic's debt is unquestionably a boon. "Being relieved of much of their debt will undoubtedly help them for a while but "we have already seen a number of operators who sold to Classic re-enter the market and reclaim a significant market share," Berk says. "I don't see Classic rebuying these people. It's business as usual."
In contrast, Steve Kohn, head of Millers Rentals of Edison, N.J., sees the Apollo deal as a sign that times are improving for both the rental industry and the economy as a whole.
READY TO ADJUST? "I don’t think the economy was a major factor in this situation," Kohn says. "The industry has handled the up-and-down swings very well. Good companies learn to adjust."
Kohn adds, "Investors have money to spend, and this is an industry that has potential if managed correctly."
Despite dropping much of its debut load and seeing a new infusion of capital, Classic still faces some challenges, Kohn says.
"Companies can only make money when they have leadership that can effectively motivate employees, see opportunities, provide quality services and products and focus on strategic goals," Kohn says. "If they start going after the market with discounted prices and unqualified labor, they will end up right back where they started."
Kohn believes that consolidation does make sense for party rental "with limitations." "Not all markets are the same," he says. "Every specific area of the country has to be looked at differently. People familiar with one area of the country and that market should be a managing it. You can't take a logistics crew from the West Coast and place them in the East. Just too many differences to move a standard model."