Outdoor Performance Poised to Take Off
Active sporting goods, athletic apparel, and outdoor performance sports could see a record year for M&A
January 5, 2012
Athletic apparel and sporting goods makers have reason to hope that enthusiasm for their wares will outlast the season for New Year's resolutions, as industry observers are predicting that 2012 may be a record year for deals in the outdoor performance market.
"Consumers continue to buy outdoor gear because it is an extension of their identity and the lifestyle they want to emulate," explains Nathan Pund, managing director at investment banking firm D.A. Davidson of Great Falls, Mont. "They enjoy the pursuit of outdoor activity. It's a growing, healthy and profitable sector."
According to the middle market investment banking firm McGladery Capital Markets, deals within the sporting goods sector have remained strong over the years. The firm took a look at deals over the last two years and found that by the second quarter of 2011, there were at least 52 sporting goods and equipment manufacturer deals, and 33 within apparel and footwear.
Witness sporting goods giant Adidas AG recently capturing a piece of the outdoor performance market with its acquisition of the family-owned climbing footwear brand, Five Ten. The Herzogenaurach, German-based company spent $25 million on the Redlands, Calif.-based company.
Pund says the outdoor performance market is a classic case of buying being easier than building. "The Adidas-Five Ten deal is exactly that," he adds. Although Adidas has a solid reputation in innovative outdoor products, with the likes of its "Super Trekking" shoe -the first light shoe worn for extended multi-day hiking- the company was not in two significant sub-sectors, climbing and cycling.
It was more efficient for Adidas to buy Five Ten and leverage its brand and relationship with customers, than develop its own offering, says Pund. It would have taken Adidas at least five years to develop a climbing shoe similar to what Five Ten offers, says Five Ten CEO and founder Charles Cole.
Acquirers in the sector include strategic buyers, such as Adidas, V.F. Corp, Jarden Corporation, and Columbia Sportswear, all of which are awash in capital to make acquisitions. But private equity players aren't sitting on the sidelines of the sector either. Betram Capital, North Castle Partners, Swander Pace Capital, VMG Partners and TGV Partners top the scorecard of primary financial buyers in the active sporting market.
The targets are many and varied, as the outdoor performance space includes a slew of sub-sectors within the apparel and equipment space, including hunting, fishing, rock climbing, snowboarding, skiing, surfing and cycling.
Indeed, a good portion of recent deal activity has stemmed from niche areas within the action sports arena. Van Nuys, Calif.-based sporting goods equipment manufacturer Easton-Bell Sports started 2011 off with its acquisition of lacrosse equipment manufacturer Talon Lacrosse, based out of San Carlos, Calif. TSX-listed Bauer Performance Sports, a producer of ice hockey, roller hockey, lacrosse equipment and apparel products, bought the Long Island City, N.Y.-based Maverik Lacrosse, also a lacrosse apparel and equipment manufacturer, in the summer of 2010. The Franklin, Mass.-based hockey and lacrosse retailer, Pure Hockey, added the hockey division of the Dover, N.H.-based sporting goods retailer Philbricks Sports to its roster that spring.
There has also been some activity recently in surfing. Nasdaq-listed Deckers Outdoor took a liking to the exclusive sport and bought the surfing sandal brand, Sanuk of Irvine, Calif., for $120 million in cash over the summer. ASX-listed Billabong also picked up a surfing apparel and accessories brand in early July with its acquisition of Costa Mesa, Calif.-based RVCA, for an undisclosed amount.
The French specialized luxury retailer PPR, formerly known as Pinault-Printemps-Redoute, which is headquartered in Paris, got into the game and got lucky with all three boarding sports. It bought a good chunk of Volcom, Inc, a Costa Mesa, Calif.-based surf, skateboard and snowboard apparel and accessories brand geared towards young men and women. PPR offered Volcom $24.50 per share, or a deal value of $608 million, for an 87.4 percent stake in the company.
Future targets within the outdoor performance space come from the lower end of the middle market. By deal standards, the niche sector will see transactions within the range of $50 million to $30 million and lower, says Pund.
