The news that the head of party rental powerhouse Classic Party Rentals--John Campanelli—resigned Thursday has buzzed throughout the industry, with rental pros debating the significance of the development.
Campanelli, a former printing executive, took the reins at Classic in September 2004. He oversaw a mammoth expansion program that saw the organization grow—almost entirely through acquisition—from an 11-unit company operating in two states to some 35 outlets in California, the Southwest, Southeast, Florida, New York and Washington, offering extensive lines in tabletop, tenting and furniture.
Classic's acting CEO will be Pedro Mata, who is on the board of Classic's owners, Quad C.
IS CONSOLIDATION CRASHING?
Some in the industry speculate that the leadership change signals flaws in an aggressive consolidation strategy.
"It makes me think that there is a bubble about to break in the strategy of such an aggressive acquisition model," says Jim McManus, sales executive with Teterboro, N.J.-based major player Party Rental Ltd., which operates nine outlets. "I always believed in the longer, harder path of organic growth. Party Rental Ltd. is the prime example of organic growth vs. acquisition strategy. We always have to focus on the basic foundation of the customer-first philosophy, and I am not so sure consolidation benefits the customer first."
"I think sometimes being a smaller operation, it is easier to switch a plan or implement change," notes Steve Weaver, vice president of Kansas City-based Celebration Party Rentals. "Bigger companies are putting together marketing strategies months or years ahead of when they implement them, while a company our size can adapt quickly to the changing business climate." He notes that his team foresaw the falloff in corporate event spending and quickly switched to marketing to brides and other social clients, keeping this year's sales on par with 2008.
MIX OF MARKETS
The quirks of various markets make consolidation a challenge, notes Steve Kohn, president of Miller's Rentals & Sales in Edison, N.J. "With so many different markets across the country, it has to be frustrating to find just the right mix of product, people and service needed," he says. "Each region and culture is unique. I’m sure Classic found this out on numerous occasions. John went where no one has ventured before, and I’m sure he came across many hurdles. One has to respect him for how far the company has gone during these difficult economic times."
Indeed, others suggest that the tough times—which are even tougher on any company using debt to finance growth—are the true force at play.
TOLL OF TOUGH TIMES
Damon Holditch, CSEP, CERP, founder of Austin-based Marquee Event Group, suggests a simple recipe for turmoil: "Big company, big debt, bad economy?"
In a recent article in ARA's Rental Pulse newsletter, Mata said that Classic's "urgency for acquisitions is not as important anymore." (Repeated attempts to contact Mata for this article were unsuccessful.) Several rental operators point to the significance of this strategy shift.
Terry Turner, president of Knoxville, Tenn.-based All Occasions Party Rentals, says that not only has the sinking economy put Classic's investors on edge, but "They are changing their model from 'acquisition' mode to 'management' mode and that sometimes--almost all the time, actually--requires different leadership."
Stephen M. Frost, president of Stamford, Conn.-based Stamford Tent & Event Services, notes the painful power of timing. "I don’t know of many companies in our industry that aren’t feeling the effects of this recession," he says. "Classic may have felt it more acutely than most, but they would have felt the improvement eventually, as we all will. In fact, we are already starting to see some signs of things starting to come back. I think the consolidation model works; it’s just the timing that was off."
Several rental leaders praise Campanelli's work. "John is a very good businessman who built a very significant organization," says Michael Berk, president of M&M The Special Events Co., with operations in Chicago and Dallas. "He is to be applauded for all that he accomplished. The event industry is no different from any other. There are good times and tough times, and change occurs despite or because of our individual efforts."
In the September-October issue of Special Events, party rental leaders discuss the impact that consolidation has had on the event rental industry.