Anatomy of the Whistler Acquisition

In the summer of 2016 Vail Resorts announced that it was acquiring Whistler Blackcomb (WB) ski resort, one of Canada’s national treasures. At $36.00 a share, Vail was offered a 43% premium over where WB’s stock had previously been trading, thus valuing the company at over $2 bln (Including debt).

This transaction not only shook the ski industry but also sent shockwaves through the financial community. Vail was paying some jaw-dropping valuation multiples to get this deal done: roughly 36x WB earnings, 16x EBITDA, and almost 4x its book value. 

To justify this lofty price, Vail identified a long list of “synergies” they expected to recognize by adding WB to its growing network of ski resorts. One such synergy (among others) was the ability to sell more Epic passes to the locals market in Whistler and thus pull more visitors to its other resorts. Another was to drive prices up at Whistler to more closely match what the company charged at its other U.S. resorts (in $US of course!). Also, Vail’s management talked a lot about the powerful WB “brand” and the unrivalled “guest experience” that was associated with the mountain. Indeed, Whistler was to become the “crown jewel” of Vail’s growing empire and an asset that would help raise the profile and performance of the whole company.

Four years later it is hard to believe that these goals—save for the higher prices! —have been achieved. Most locals still subscribe to the legacy WB Season’s Pass and Edge Card program (who from B.C. wants to fly to a U.S. resort and pay $US to ski?). More importantly, as our petition reveals, WB’s prized “guest experience” has gone straight downhill. Increasingly unreliable lift operations; longer lines; less grooming; little snow-making; poor food: these are all common complaints (among many others) that are now voiced in the local market. 

From the outside, it is hard to know what exactly went wrong. Very likely, the high turnover in former WB staff and management has something to do with it. Also, it is reasonable to assume (and in some cases easy to see) that Vail has imposed its own practices and procedures on the mountain, many of which don’t fit well in the WB environment (or Canada in general). Finally, a quick look at Vail’s financial statements reveals that the company has been taking on more and more debt to pay for its growing list of acquisitions (net debt has almost tripled since the WB acquisition!). Perhaps this is coming at the expense of investments that are required to keep existing assets running smoothly as the network continues to expand (the ageing “Creakside” gondola comes to mind!)?

Whatever the explanation, it is not that surprising to see these problems transpire. Indeed, many studies of corporate M&A reveal that most acquisitions fail to meet their goals and do not create any lasting long-term value. In this case, what Vail appears to have missed is that the magic of Whistler did not come directly from the mountains themselves or the vast terrain and spectacular scenery that they offer. Nor was the skiing per se the real pull (in fact, the snow is often wet and the weather unreliable). Instead, what made Whistler special was a committed management team (remember seeing Dave Brownlie, WB's CEO, cleaning tables in the Roundhouse?); a relentless attention to detail around the mountain’s operations; a passionate, engaged staff; and a locals community that was fervidly proud of the powerful and unique culture that they had helped create. Lose any (or all of these) factors and Whistler quickly becomes just another ski hill—or in this case just another over-priced ski hill! 

Maybe this will all be turned around. But one thing is for sure: without the support and engagement of the local community—which may be small but is very powerful—Vail’s WB acquisition is doomed to fail. Let’s hope that doesn’t happen; and let’s hope they start listening more closely to what the locals want.