Bill Melvin grew up around motorsports, so it seems only natural that being a gearhead would translate into his professional life. Melvin owns and operates Liquid Asset Partners, a Grand Rapids-based asset liquidation firm. The company specializes in selling assets of distressed companies, healthy companies looking to offload old equipment and inventory and business owners looking to transition out of their business. Lately, Liquid Asset Partners has taken a slightly different path, acquiring two iconic names in motorsports: motorcycle manufacturer Eric Buell Racing, headquartered in East Troy, Wis., and most recently Braselton, Ga.-based Skip Barber Racing School. Melvin spoke with MiBiz about his company’s decision to acquire these organizations as well as his business model and future plans.
Both the Skip Barber and Eric Buell Racing acquisitions are departures from your traditional business model. What was your motivation for acquiring them?
In 2004, my dad was very close to acquiring the Indian Motorcycle factory. He was planning to buy it and operate, continue manufacturing. It was owned by a private equity firm, and they didn’t want to sell the intellectual property with all the equipment and assets. They ended up selling him all the physical assets, so we did a liquidation of the factory, (but) they ended up selling the intellectual property a year later for less than what we bid for it. In that process, I learned a lot about a turnkey operation and always grew up in motorsports, motorcycles, cars.
So that connection with motorsports is what drew you to the businesses?
We like things that go fast, and they also make for good projects as well. In the liquidation or auction business, they get a lot of excited buyers. Going into different locations, warehouses, stores, I always keep in the back of my mind the potential for a turnkey operation. When we went into the Erik Buell Racing factory, EBR Motorcycles, it was turnkey. We had to work out a few things with management and decided to restart production. We did production for about a year, and it wasn’t quite able to get to the types of volume that we were looking for. About seven months ago, we made the decision to wind down the majority of the higher-volume production.
Are you planning to restart the business?
There’s some thoughts going on it, yeah. It’s still fully licensed for manufacturing. We’ve got a great quality vehicle that people like, but at the time we were unable to get the kind of volume that we needed to support the type of facility that we had. The factory was really set up for doing 4,000 to 8,000 units a year, and we weren’t getting close to that. When we saw that, we realized it was probably a good decision to start downsizing, consolidating, liquidating off a lot of the equipment and excess and looking at continuing to support the dealers and the warranty but also potentially some future plans that would be on a smaller scale.
Was the Skip Barber acquisition a similar story?
When we evaluated that project, we could see that the way that it was currently being run wasn’t something that we would want to step into and operate the same way. We’re going to liquidate the equipment and vehicles and parts. Then we also have learned a lot from different types of projects, and in our industry there’s a lot of value with intellectual property and different ways to extract value either for clients or for something that we acquire. We saw that there’s good potential here for a potential licensing deal, so we’ve had some good interest already. There’s potential for some announcements in the next few weeks.
Would licensing allow other driving schools to use the Skip Barber name and training materials?
Yes, and use the methods, potentially bring in some of the past instructors and have a very high-quality program. People really like the methods of the Skip Barber School, but also it’s the best-known driving school in the country.
How does your business model work?
Very often, we’re court appointed. We also get hired by banks. We get hired by Fortune 500 companies, and something that we pride ourselves on is giving a lot of attention to private owners — someone who wants to retire, but they might not have an exit strategy. Maybe they built up a lot of value in their building, and the company’s had some off and on years, and they just want to liquidate off all the inventory and equipment. We can help them auction off the building, too.
In cases such as the Skip Barber and Eric Buell acquisitions, do you raise capital?
We have normal banking relationships.
How did you get involved in the business?
I started when I was a kid. I think when I was eight or nine, I was out in the storage warehouse sorting inventory. If I remember, my dad bought a deal with 2,000 ski boots. They were all mixed together and stuff, so I was out in the warehouse with one of his managers, and we were sorting inventory in-house, helping him line up matches. Pretty quickly after college, I had one other job and then my dad was saying, ‘Hey, if you want to come learn the business, it’s time to do that now’ before he was ready to retire.