Superintendents employed by ClubCorp Holdings need not fear the July 9 sale of their company to a private equity firm, according to a pair of golf management specialists, both of whom once held executive positions with ClubCorp.
In fact, they say, the acquisition by buyout specialist Apollo Global Management, which spent $1.1 billion to acquire ClubCorp, likely will benefit employees, shareholders, and members of the country’s largest owner operator of private golf and country clubs.
“As a superintendent, I’d be optimistic rather than concerned,” Bob Devitz, the principal at Golf Marketing and Management Solutions, says. “Apollo isn’t going to come in and make wholesale changes to the staffs of the clubs. I think you can probably expect to see some changes at the corporate level, but the regional support staff will probably be less affected, and the people least affected will be those on the ground who are in place operating the clubs.”
“I don’t think they have anything to worry about,” Phillip Stika, the club development officer with
Arnold Palmer Golf Management/Century Golf, says. “I think change is always good.”
Apollo, with assets of up to $197 billion, is one of the largest private equity firms on Wall Street, boasting a portfolio that includes ADT, AMC Theaters, Norwegian Cruise Lines, Diamond Resorts International, and Chuck E. Cheese. Its ClubCorp acquisition is expected to close in the fourth quarter.
“An investment company like Apollo isn’t going to look at this and say, ‘Let’s run this thing into the ground,” Devitz says. “I think that maybe the (ClubCorp) leadership that was in place wasn’t getting it done, and ostensibly with new leadership now going to be put in place, the company will start again growing its relevant revenue sources. When the business does well, that’s good for everyone.”
ClubCorp, which went public in 2013, had reported first-quarter liabilities and long-term debts that totaled more than $1.9 billion. After unsuccessfully searching for an investor, the company three months ago announced the retirement of CEO Eric Affeldt and said it had decided “not to pursue a strategic transaction at this time.”
“I’m friends with some (ClubCorp) people, and (the Apollo sale) was a surprise to almost everyone, especially after stating that they had gone through a review and decided not to pursue a sale,” Devitz says. “Three months later, here we go.”
“I think the reason there was not a lot of interest,” Stika says, “was because the price was awfully high. The debt was high, and the general business has been overbuilt for quite some time. … (ClubCorp and Apollo) found a price they could agree on.”
ClubCorp’s portfolio at the end of the first quarter included 162 golf and country clubs and 45 business, sports, and alumni clubs.
“When I started with ClubCorp (in 1980), they owned 56 properties,” Stika says. “When I left (in 2003), there were over 350 across the world.”
Devitz and Stika both worked at least two decades for ClubCorp — “the king of all the club companies,” Stika says — between the early 1980s, when ClubCorp acquired Firestone Country Club in Akron, Ohio, and Pinehurst Resort and Country Club in Pinehurst, N.C., and 2006, when the Dedmans sold the family business for $1.8 billion to private equity firm KSL Capital.
“We had a strong leader in (founder) Robert Dedman,” Stika says. “He broke it down very simply — membership is everything. He would refer to real estate, where the three most important things are ‘location location, location.’ With a private club, he said the three most important things are dues, dues, dues. I learned very early from Mr. Dedman that if you put more members into the club this year than last year, every revenue inclined. I understood early on that, if I could become singularly focused on how to be the best membership person, my clubs just grew. I don’t think I ever had one negative trend in any club that I’ve ever been involved with.”
KSL, seven years after its purchase of ClubCorp, took the company private in 2013 — a not-so-good change, according to Devitz and Stika.
“It seems like they’ve really been stuck in neutral since going public,” Devitz says. “I think the IPO price was $14, and when Apollo made this deal it was just shy of $13. Over about four years of being in the public realm, they weren’t able to drive shareholder value. … I think they maybe realized that the public realm wasn’t for them. There’s too much scrutiny. Too many people asking too many questions. When this opportunity came up, they said, ‘You know, let’s get back to being private.’”
“Going public makes it difficult to operate clubs when you have stockholders to report to because they’re looking at the investment and expecting large returns,” Stika says. “Sometimes the leadership doesn’t make the best decisions based on membership any more. It’s based on stock prices. So they may make cuts in operations, which affects member satisfaction, which causes members to leave.”
Stika’s advice to Apollo?
“Keeping it as simple as I can, every decision you make should revolve around the question, ‘How is this going to bring me more members?’” he says.
Devitz, meanwhile, believes Apollo will take advantage of what ClubCorp has perennially offered.
“They’ve got attractive properties in good markets. The company historically has great training in place for every department. There are great standards of operation to ensure consistency of the experience,” he says. “Apollo, which obviously will generate a little bit of a cash flow, probably looked at it and saw a lot of untapped potential from a revenue growth perspective as well as the opportunity to tune up margins with properties that, even though they are older, weren’t suffering from deficient maintenance or anything along those lines. If nothing else, i think (ClubCorp) did a good job making sure they took care of their clubs.”