By Charlie Lunan
A spate of small acquisitions in recent weeks could mark the last gasps, rather than a resurgence, of a four-year boom in mergers and acquisitions in the global sporting goods industry, according to one investment banker.
At least four new deals involving sporting goods brands have been announced since June 30. In addition, Incipio LLC moved ahead July 6 with its previously announced $177 million offer for Skullcandy, Sequential Brands Group Inc. completed its $167 million acquisition of the Gaiam yoga brand, and Adidas completed its sale of Mitchell & Ness.
The list of new deals, with links below to broader SGB Executive coverage, includes:
- BRAVO SPORTS ACQUIRES SECTOR 9 FROM BILLABONG
- BRUNSWICK ACQUIRES BOAT BUILDER THUNDER JET
- THULE ACQUIRES CHILD BIKE SEAT MAKER
- SHIMANO EU ACQUIRES LAZER SPORT NV
While the deals span a diverse range of brands and owners, they are typical of the of transactions seen late in the M&A cycle, when investors tend to focus more on pruning weaker performers from their portfolios than adding new ones, said Mike Smith, an investment banker focused on the consumer and active lifestyle space at D.A. Davidson & Co.
“There are a lot of corporations just cleaning up the house,” said Smith. “There are a lot of brands that have not done well, or a lot of brands not growing as fast this year as last year. ”
In recent weeks, Smith has heard from four private equity firms looking to sell brands acquired in 2008. Such firms prefer to flip their portfolio companies within seven years, but resisted selling in the wake of the financial crisis in the hopes that valuations would rebound. With interest rates low, sales disappointing and hostility toward free trade growing, they are no longer willing to hold out for higher valuations.
“The funds figure that this is as good as it’s going to get,” Smith said of the market. “People definitely feel valuations are starting to soften, because the performance of the companies is starting to soften.”
Smith noted two major underpinnings of the M&A boom remain in place and will fuel dealflow for the balance of 2016.
“There is still a lot of cash in private equity chasing private deals and a lot of cash on corporate balance sheets chasing deals,” he said. “But, there is a little bit of seeing an end to a really strong market.”
Photo courtesy Gaiam