THE WALL STREET JOURNAL
Bigger Players Acquire
Mom-and-Pop Firms,
Take Business Nationwide
By ELIZABETH HOLMES
September 12, 2006; Page B6

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Unlike the clothing featured at New York Fashion Week, the lavish tenting covering the runways didn't come from shops in Paris, Milan or even Manhattan. It came from a little-known company in Wisconsin.

Milwaukee-based Karl's Event Rental provided 80,000 square feet of tenting -- some 45,000 pounds vinyl fabric for nine large tents -- to house the models, editors and retailers, as well as support the elaborate lighting system strung from it. All the supplies were hauled from a Midwest warehouse and assembled by 80 staffers (most of them out-of-towners).

Once the domain of tiny mom-and-pop shops, the $3 billion event-rental industry is consolidating into the hands of a few big players racing to shore up national dominance. In the past year, Karl's has put on events in 45 states, including the National Football League's corporate hospital village in Detroit at the 2006 Super Bowl. Meantime, El Segundo, Calif.-based Classic Party Rentals, the largest company in the market with $180 million in revenue, has supplied parties for the ESPN X Games in Los Angeles and PGA Tour events along the West Coast. Another player, McCook, Ill.-based Chicago Party Rental works with events like the Kentucky Derby and Nascar.

The expansion of these companies, primarily through acquisitions of smaller shops, is shifting the dynamic of a market where sales growth has long been limited by geographic restraints. By purchasing businesses across the country, bigger event players say they instantly obtain a new client base, as well as the expertise of the local shop owners who have relationships with a region's party planners and givers. (Often, local staffers are kept on.)

The tactic also allows the companies to bypass high start-up expenses and gives them economies of scale with their tents, tables, and glassware by putting it all to use more often. Sometimes inventory is kept locally; other times it is stored in giant warehouses and shipped out for events, such as Fashion Week. And the consolidation lets these companies pull off more elaborate events through a constantly expanding catalog of supplies.

For event planners, such resources make a difference. "Every detail is important to us," says Inna Poncher, owner of Poko Event Productions, based in Los Angeles. "We need to be able to work with a company that takes that into consideration."

Ms. Poncher says she dreamed up News Corp.'s five-day "Imagining the Future" conference for 500 guests last month in the mountains around Pebble Beach, Calif. She worked with Classic Party Rentals, the company leading the acquisition trend. Guests dined one evening in the courtyard of a Spanish basilica, sitting at rare Descanso tables, a style of furniture that complemented the venue's rustic feel. At the closing gala, executives sipped cocktails from cobalt glassware to accentuate the evening's futuristic theme.

Three years ago, Classic didn't have those specialty items. The company inherited the blue glasses in 2003, with its purchase of Unique Tabletop Rentals, of Rancho Dominguez, Calif. The Descanso tables came from Abbey Event Services, of Montebello, Calif., which Classic bought in 2005.

In all, Classic has acquired 11 competitors since 2003 -- six in the past 10 months -- with operations in seven states. Classic's chief executive, John Campanelli, says the acquisition pattern will continue at a rate of three to four a year. The goal is to broaden their inventory, expand their territory and professionalize what has largely been a family-run business model.

Still, the business model can be deceiving. Investors are drawn to what appears to be the simplicity of the business, according to Mark Clawson, president and chief executive of Salt Lake City-based Diamond Rentals. Mr. Clawson says he never fully grasped the complexity of the business until he was a part of it, assuming that anyone could learn about dishware and tenting. Mr. Clawson soon learned that executives must manage extensive amounts of materials and labor while keeping abreast of the latest trends and managing client relationships. "The level of service required to be successful is almost painfully high," he says.

Additionally, the individual attention and connections afforded by smaller operations is why mom-and-pop shops dominated the scene for so long -- and mass homogenization could threaten that. Customers in some areas can be hesitant about using an acquired company with a new name. The bigger companies say they're aware of these nuances and try to work around them. Most of Classic Party's shops bear that name; however, some, like Dallas-based Ducky-Bob's Event Specialists, have such an established brand that Classic simply adds its tagline ("A Classic Party Rentals company") to it.

These larger players say their size also lets them accommodate customers' whims in a way that lone shops probably couldn't afford to. For instance, the UPS-sponsored runway at Fashion Week in New York is bathed in chocolate color fabric, which Karl's purchased specifically for Fashion Week and won't likely use again. Unless, jokes Karl's president, John Schlueter, "brown becomes in fashion for wedding and corporate events."

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