Eastern Canada's ski season has officially come to a close. However, there is more reason than ever to keep an eye on the moguls. While activities on the slopes may have ceased, market activity is often at its peak during the off-season (pun intended). For example, in April 2017, Aspen Skiing Co purchased Intrawest – the company that owned the Blue Mountain and Mont Tremblant ski resorts – for $1.5 billion US. In August of the year prior, Vail Resorts similarly agreed to purchase Whistler Blackcomb for $1.4 billion.
For buyers considering such an investment this off-season, the following considerations should be kept in mind:
- Climate-related risks:As discussed in a previous post, climate change is a reality we cannot ignore. Investors need to remain alive to the potential negative impact that climate change can have on the value of a business. A ski hill's ability to adapt to a changing climate in the long-run will undoubtedly impact its future financial viability. A buyer would be remiss to neglect assessment of the hill's prospects for the long-term attraction of customers in a world where snow and cold temperatures are poised to become increasingly rare commodities.
- Business model and climate-related risks: Buyers should also look beyond climate change regulatory risk assessments and delve into the business model of the ski hill itself. Buyers should inquire into corporate governance matters and risk management practices used to mitigate future climate-related risk and should consider how such assessment has impacted the business' financial planning. The buyer should ask whether the ski hill has the resilience necessary to adapt to the effects of climate change. For instance, can the site offer warm weather activities like hiking trails, waterparks, or mountain biking? Does the site have the space needed to accommodate more snow-producing equipment should the winter months continue to shorten and warm? Buyers would be well-served to understand exactly how the company has accounted for climate-related issues in its financial planning process.
- Environmental considerations:If plans of expansion are on the horizon, it is critical that a buyer ensure necessary environmental approvals will be forthcoming. Given that ski hills are often home to a host of flora and fauna, buyers should conduct considerable due diligence to ensure their expansion plans will not run afoul of environmental rules or guidelines. Last year, a preeminent Alberta ski hill was fined $2.1 million for taking down endangered trees without a permit, which serves as a cautionary tale for future ski hill investors. The rise of environmental activism also means that failure to abide by environmental regulations can result in significant reputational damage, ultimately impacting earning potential.
- Regulatory risks:Ski hills also come with their own set of regulatory risks. Buyers should ensure that adequate operational logs and records for equipment have been obtained, and that any reporting requirements have been complied with pursuant to applicable technical standards and safety legislation. Furthermore, the buyer may wish to request copies of equipment warranties, licences, and staff training certifications.
When it comes to purchasing a ski hill, conducting a thorough due diligence analysis is crucial. Climate-related risks, environmental issues, and regulatory requirements are only a few in a flurry of considerations. Be sure to use your off-season wisely.
The author would like to thank Elana Friedman and Meaghan Farrell, articling students, for their contribution to this article.
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