Trish Higgins·July 12, 2022

Why Chenmark Bought a Boat Tour Business

Trish Higgins, co-founder and partner at Chenmark — a self-funded, permanent holding company that has made nine platform and 30+ total acquisitions since 2015 — discusses the acquisition of Captain Fish Cruises, a three-generation whale-watching and puffin boat tour business in midcoast Maine that Chenmark bought in February 2020, one week before COVID shut down tourism statewide. The deal fit Chenmark's $1m-$3m EBITDA, 3x-5x multiple thesis and appealed because of its 'bait and tackle' characteristics: owned dock, owned boats, one of only three whale-watch operators in Maine, and a strategically located harbor between Portland and Bar Harbor on the main tourist corridor. Despite having zero boating expertise, Trish stepped in as the operator, managed COVID restrictions by drilling down to per-trip gross profit and cutting all non-essential costs, and ultimately turned a profit even at 50% passenger capacity. Key ongoing risks include extreme seasonality, a razor-thin full-time headcount (effectively one critical captain), and the rocky day-one moment when the seller failed to warn the retained employee the business had been sold. By the time of the episode, Chenmark had also completed a bolt-on acquisition of a nearby competitor with one smaller boat, sharing crew across three vessels to reduce staffing fragility. The episode is as much a Chenmark model explainer — internally funded holdco, long-term ownership, bait-and-tackle asset selection — as it is a single-deal story.

Deal facts

multiple: 3x-5x EBITDA (stated range)
sde ebitda: $1m-$3m EBITDA (stated range)
notes: Chenmark looks for businesses with $1m-$3m EBITDA bought at 3x-5x; Captain Fish Cruises fits within that range. Business was their 6th or 7th platform acquisition. A second bolt-on boat tour company (~40 minutes away, one boat, less than half the size) was acquired approximately 5-6 weeks before the episode aired. Business acquired February 2020, one week before COVID hit.

Why this business

It was right in their backyard — about an hour from their house — so they took a closer look when a local broker showed them the listing. It fit their rough valuation metrics. Trish was personally drawn to running it, having previously considered stepping into a CEO role at another deal. The business had a 'bait and tackle' quality: a protected competitive position, owned dock, owned boats, limited local competition for large-vessel whale watching, and a location between Portland and Bar Harbor on a natural tourist route through midcoast Maine. Puffin and whale watching tours from that specific harbor could not easily be replicated by Portland or Bar Harbor operators.

What's working

Strong competitive moat from owned dock and boats, limited large-vessel competition in the harbor, and being one of only three whale-watch operators in Maine
Location between Portland and Bar Harbor makes it a natural mid-trip stop for Maine tourists, driving consistent demand
Proximity to Atlantic puffin habitat — a bucket-list birding experience — that neither Portland nor Bar Harbor operators can reach in a reasonable time
High load-factor economics: only ~20 passengers needed to break even on a 149-person vessel, so each additional ticket drops nearly entirely to the bottom line
Pricing power over tourists: visitors on a Maine vacation are spending thousands and view a boat tour as a small fraction of total trip cost, enabling higher price points than a locals-only market would support
Being part of the Chenmark holding company allowed the business to weather COVID (cash buffer from other portfolio companies, no debt covenant stress) and take on more risk than a standalone SBA deal could have
Second acquisition of a nearby competitor provided crew-sharing flexibility, staff continuity, and incremental revenue with minimal additional overhead
Strong TripAdvisor reputation (2,341 reviews, solid five stars as of episode date)

What's hard

Acquired one week before COVID shut down Maine tourism; had to operate at 50% capacity (50 of 149 passengers) for the first season
Highly seasonal — over 50% of revenue in July and August, requiring careful cash management to avoid spending October's accumulated cash before the next season's expenses
Essentially no employees in the off-season (one full-time captain/maintenance person), which is a screaming vulnerability if that person leaves
The seller (Captain Fish) did not tell the key full-time employee the business was for sale and only informed him the day after closing — creating a rocky, anxious start to that critical relationship
Full staff turnover in year one combined with a ticketing system change created a steep training curve
A captain departed just before July 4th in a subsequent year, forcing cancellation of trips during peak season — illustrating the operational fragility of concentrated seasonality
Most other boat tour businesses are unattractive: boat asset value often exceeds the business's earnings multiple, dock leases are often month-to-month or revenue-share, and deferred boat maintenance can hide large future capex
Trish had no boating knowledge and had to rely heavily on trusting the seller's vouching for the retained captain

Notable quotes

It is not really a great search business in that it doesn't really fit a lot of the characteristics searchers are looking for — no contracted revenue, highly seasonal, a lot of staff turnover — those are all things that would probably make you know if you were going to a traditional search fund or an accelerator or something they would be like absolutely not.

We think about it in terms of load factor so if you have 149 people on a boat and it only takes 20 or so to break even from a gross profit perspective then every single one on top of that is essentially — once you cover your overhead — drops directly to the bottom line.

You need to be thinking about pricing from the traveler's perspective not from the locals' perspective — a person who's coming from Wisconsin who's never been to Maine before and is on their August vacation might be willing to pay 25 or 30 and think it's a great deal.

We really like bait and tackle shops because we in the holding company structure have the ability to say hey you know what, bait and tackle shop, you generated a million dollars — we have the ability to use that to make another acquisition.