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DavEl/BostonCoach CEO Scott Solombrino (LCT file photo)
When Scott Solombrino announced at the DavEl/BostonCoach annual affiliate meeting in August that the company intended to acquire chauffeured operations as part of its strategic plan, the 300-plus affiliates who were present were left to speculate on the who, what, when and why.
On Oct. 1, Solombrino made the first of what he promised would be a wave of announcements. The company, which has 589 affiliates worldwide, purchased Torrey Pines Transportation, the second largest operation in San Diego County.
LCT: To some, this purchase was perplexing because on the surface the company, at 17 vehicles and less than $5 million revenue, doesn't seem big enough for a company your size to bother with. What’s your reasoning here?
Solombrino: DavEl/BostonCoach wants to broaden its footprint in California. San Diego has a great convention/meetings business and we want to tap into that more. It’s our opinion that San Diego has always been underserved. We anticipate we will double the size of Torrey Pines in the next 12 months. Further up the corridor, from San Diego to Newport Beach, we find an unpolished gem as well.
LCT: In a time when many brick-and-mortar businesses are moving towards the outsource model, this play seems counterintuitive to that trend. Why not just outsource?
Solombrino: We do outsource and we will continue to lean on our affiliates. However, there is a point when we look at our volume and say, “Hey, we are sending too much work out. We need to have some metal here.” There is a point when we determine it’s safer from a quality control standpoint to physically be there. In the San Diego market, we see too much untapped growth potential and not enough companies that can do the work our way. We become too exposed to mistakes, which our clients of course won't tolerate. While it's true that more companies are moving away from company-owned fleets, we believe that is a flawed strategy. In today’s environment, creating “separateness from TNCs” is a key selling point. So we’re betting on that and expanding our corporate owned fleets. It’s contrary to popular vote, however, that’s the point. We want to be different.
LCT: Will you change the name of the company to DavEl/BostonCoach San Diego?
Solombrino: No. We’re leaving the brand intact for now because Torrey has a solid reputation and brand equity that holds value.
LCT: You stated to us that many deals come across your desk. How did this one find you?
Solombrino: Honestly, Torrey Pines fell into our lap. Charles Tenney [broker] brought us this deal and it just looked good. We are not exactly prospecting 15-car operations, but on the other hand we are looking at all solid options and growth markets.
LCT: How do you analyze a company in terms of valuation?
Solombrino: It all has to look good on paper — strong brand equity and recognition, a solid client base, profitable, and with a great legacy. Unfortunately, there’s a reason companies are for sale in this market. Many are in really bad shape which we find out through due diligence.
LCT: What kinds of problems are you seeing that turn you off from buying?
Solombrino: Companies with too many legal issues, companies with employee issues, weak brands, outdated infrastructure. And the kiss of death is that they are not making money.
LCT: Back to California. You love the state even though it's one of the toughest on businesses. What makes it worth it to put up with all the hassles?
Solombrino: Money. There is a lot of wealth and the market regions are spread out. We are very serious about Orange County and that’s only an hour or so away from San Diego. There is just so much affluence. Orange County is a key California market, and as I've said, we are looking at that. We own a huge customer base in California, San Diego included.
LCT: It's clearly a great time to buy companies, but with valuations the way they are, no one's going to make it rich selling off a company in this climate. Would you agree?
Solombrino: No doubt about it. Valuations are off.