The Shepler family’s decision to sell the third-generation-owned ferry transportation company was “not taken lightly, but it was necessary.”
That’s according to Chris Shepler, the 60-year-old president and CEO of the iconic Shepler’s Inc. ferry service that has transported millions of passengers between Mackinac Island and docks in Mackinaw City and St. Ignace.
Started by Shepler’s grandfather in 1945 with a six-passenger cabin cruiser, the company has grown to a fleet of seven high-speed ferries that transport about 650,000 people to the island each six-month season. The company employs nearly 200 people.
Shepler and his siblings, Billy Shepler and Patty (Shepler) Fuhrman, each served in leadership roles and owned a one-third share in the company. With each of them nearing retirement age, the company realized it needed to prioritize succession planning.
The COVID-19 pandemic, which still brought hordes of passengers, “was the straw that broke the camel’s back,” Shepler said.
“COVID just completely burned me out,” said Shepler, noting the effects of the “great resignation” and a lack of available workers that contributed to the siblings putting in more hours.
“We went into a season in 2021 with 60 fewer employees but 25-percent up in business. That meant the family members were putting in some large hours and doing whatever it took to help the crew. … It was a very daunting year, a very tough year,” Shepler said. “After that year, it was like, ‘Oh my gosh, 2019, 2020 and 2021.’ With all of the things going on in the business, it just wreaked havoc on everyone.”
With a lack of family successors in the next generation, the siblings outlined three options: sell to employees under an employee stock ownership plan (ESOP); keep the business in the family’s name and run it from board positions but withdraw from the operations; or sell it outright.
Noting drawbacks with the first two options, the family elected to pursue an outright sale, though Shepler admitted, “I knew nothing about mergers and acquisitions and the private equity world.”
However, after assembling a team of attorneys and investment bankers, the proverbial ball started rolling. The family found a buyer in Naples, Fla.-based Hoffmann Family of Companies, which owns cruise groups across the country and other holdings in hospitality, agriculture and commercial real estate, to name a few.
“Eight to nine months later, we were signing on the dotted line,” Shepler said of the March 2022 closing. “It happened very quickly and it was a unanimous decision to move forward with our family.”
Shepler remains in his role as president and CEO, and Billy Shepler has stayed on as fleet captain, both under three-year contracts.
“Everything we’re doing is geared toward the succession of the company so when I walk out the door for the last time, the company continues to run at a high level and it was like I was never here,” Chris Shepler said.
Despite the speed of the deal, the Shepler’s sale was loaded with complexities, including cultural sensitivities of dealmaking in small town northern Michigan and extensive real estate holdings that threatened to delay the deal.
The all-stock deal, which resulted in a lower sale price but also came with tax advantages, was driven in part by the real estate complexities. The stock sale closed in March 2022, while the 42 pieces of property the family had accumulated over decades were sold in August.
Attorneys working on the deal couldn’t get a clear title on some of the parcels because some of the land descriptions dated back decades, including with markers such as large rocks or trees that no longer existed. Some land surveying also was incomplete.
Greg Demers, partner at Warner Norcross + Judd LLP who worked as the lead adviser on the deal, said defunct railroads also were included in the chain of title.
“We were able to close the deal in March and have a small set aside for the identified real property issues,” Demers said. “We couldn’t give a marketable title to prices on closing, but there was a set aside on the purchase price so we were able to settle the real estate later.”
Meanwhile, the tight-knit community on the island and mainland “absolutely complicated everything,” Shepler said. The all-stock transaction also allowed the company to keep the sale confidential until closing because it preserved the entities that held various properties and leases and eliminated the need for third party-approvals to convey them to new owners.
Following the sale of a ferry company there a decade ago, Shepler said he wanted to ensure that the deal was well planned and that nothing operationally would change under new ownership was clearly communicated. That effort included hiring Lansing-based public relations firm Truscott Rossman Group LLC to handle both internal and external messaging.
“It was very important that we assured Mackinac Island that nothing would change with our business,” Shepler said.