While the paddlesports industry saw a series of acquisitions last month, the deal environment became more active than it has been for nearly a year this week, with four acquisitions three of which have a direct impact on the Bicycle, Outdoor, and SnowSports industries. The environment for acquisitions is still not as hot as it was two years ago, mainly because there are not as many large, premium brands available.
Between K2, VF Corp., Quiksilver, and a host of other serial consolidators, the vast majority of the top-tier brands are already stabled with one holding company or another. For a while this drove up prices on deals, but with only second- and third-tier brands to choose from, both strategic and equity buyers are looking for prices to fall. At the same time, if a premium brand does come on the market, there will likely be a scarcity premium attached to the final selling price.
Perhaps the largest deal this week was Helly Hansen with roughly $210 million in trailing twelve month sales. The company changed hands between two European private equity firms. While full details were not disclosed, sources familiar with the deal expect that the company sold for just under 1X sales, or somewhere from $185 million to $200 million. While the sales multiple is somewhat below the average selling price, speculation around the EBITDA multiple is in-line with several of the premium deals in the industry somewhere between 10X and 15X EBITDA.
There were reportedly several top-tier strategic buyers bidding on Helly, but Altor, a three-year-old P.E. firm that specializes in acquiring mid-sized companies in the Nordic region, was reportedly “very aggressive” in its bidding and took the deal home. Altor says that it works as an “active owner” to “contribute to positive and lasting change in its portfolio companies.” So, it is likely there will be some structural changes at Helly, primarily in the amount of debt-load the company is carrying.
The deal is signed, and for all intents and purposes, closed, but still waiting on EU regulatory approvals. Officials at Helly Hansen declined to comment on any strategic changes until the acquisition receives these final approvals and officially closes.
The current management team has effectively transformed the company over the past few years and created a brand with a viable technical story combined with a youth-oriented style. In addition, the team has built a solid independent retail base combined with Helly Hansen branded retail franchises.
For the deal, Investcorp was advised by KPMG Corporate Finance and Silver Steep Partners. Altor was advised by SEB Enskilda ASA and Cardo Partners AS.
The second deal relevant to the Bicycle, Outdoor, and SnowSports industries this week raised a few eyebrows from footwear company executives across the board. Crocs acquired EXO Italia, a designer and developer of ethylene-vinyl acetate, or EVA-based finished products with a focus on the footwear industry. Crocs are currently made from a proprietary “Crosslite” PCCR material, and this acquisition raises the question of where Crocs is going next.
In a prepared statement, Ron Snyder, president and CEO of Crocs, Inc., said, “EXO is renowned for developing some of the best EVA based footwear products and we look forward to combining their industry leading capabilities with our proprietary Croslite material. EXO's expertise in design, product, tool, and process development will be a tremendous asset to us as we look to further diversify our footwear offerings and attract new consumers to the Crocs brand.”
Crocs has long been criticized as a one product company, but if it is able to develop some new footwear technology and maintain the brands recognition, it could expand into new product lines. No financial details from the deal were available.
The final relevant deal of the week will be sure to change the look and feel of the show floor at SIA. The Tecnica Group, which has long been associated with Volkl and Marker in the U.S., has acquired the majority, controlling interest in Blizzard Gmbh, with manufacturing, sales, and marketing based in Austria. Tecnicas Nordica subsidiary, which is 100% owned by Tecnica will acquire 66.66% of the Blizzard Sport Gmbh shares. The remaining shares will be owned by Karl Hofstatter, current CEO of Blizzard.
One of the companies first steps will be to partially integrate Nordica ski production in Blizzards Mittersill, Austria factory. This is expected to achieve immediate synergies in raw material purchasing, ski production, and research and development of new products. Eventually, both companies will also benefit from the new Blizzard production facility in the Ukraine, scheduled to begin production in January, 2007. Blizzard will also utilize the international strength of the Tecnica Group to improve international sales and distribution.
Giancarlo Zanatta, president and CEO of the Tecnica Group said that Blizzards existing background in technology and manufacturing will compliment Nordicas development and production, while the Italian companys marketing expertise will help to strengthen the Blizzard brand. Mr. Zanatta expects this Blizzard acquisition to move the Tecnica Groups annual sales beyond 400 million ($500 mm).
This most recent wave of acquisitions is showing signs of more momentum as well, with hints coming from K2 Inc. (see the full story on page 3 of this issue) and other strategic and equity investors. It is highly likely that several more deals will close before the winter show season begins.
