In a deal that has been in the works for several months, Apax Partners last week finalized its acquisition of Spyder Active Sports in a transaction valued at approximately $100 million, including assumption of debt. Apax is one of the largest private equity funds in the market, with over $12 billion in investment capital at its disposal.
Recently, the North American retail and consumer division of Apax has been focusing on the sports and recreation industries. Under the leadership of partner David Landau, the company has closed several major deals, including the successful IPOs of Sunglass Hut and Lifetime Fitness. Apax is also the investor behind the recent acquisition-fueled growth of the on-line bicycle retailer, Performance Inc.
Landau told BOSS that Spyder caught his eye for several reasons. “The company was growing very rapidly and systematically,” he said. “There was also a very strong management team in place that we felt comfortable backing Its our job to be familiar with the most interesting and exciting brands out there, especially if they are growing Like Spyder is.”
With K2 snapping up two performance apparel companies, Marmot and Ex Officio, back-to-back, there has been a bit of a premium placed on companies in the soft-goods sector. Spyder had reportedly already turned down a deal valued at 1x its estimated 2004 sales of $88 million or roughly 7x to 7.5x estimated EBITDA in the $12 million to $13 million range.
Landau said, “It is very rare to find a company with this strong of a brand that is growing this rapidly. When we find this we would expect a premium to be attached to it, and we are comfortable paying this premium.”
Spyders former equity investor, CHB Partners, no longer holds a stake in the company. However, Spyders founder and president, David Jacobs and his senior management team hold a “significant” minority interest in the company, while Apax holds the controlling stake. Jacobs is under contract to remain at the helm through 2010.
Jacobs told BOSS that Spyder has been growing at around 40% to 50% for the last few years. Sales in 2002 were “just over $40 million,” and jumped to around $61 million last year. Jacobs said that they currently have $85 million in bookings for 2004.
According to Jacobs, “Growth is coming from a consolidation of retail in large corporations hands, and a falling away of marginal brands that dont make the cut with the large buyers Spyders retail accounts are buying deeper into the collections.”
As far as future growth goes, Jacobs sees it coming from a combination of increased sales in their fall collection and an expansion into the summer market. “By Spring 07 at the latest, Spyder will enter into the summer markets,” he said. “Were not going to start making hiking shorts and compete with The North Face or Royal Robbins. Spyder is an edgy company, an action company.”
As for growth plans, both Jacobs and Apax have big ideas for the brand. “We expect Spyder to be a $300 million dollar company in five years,” said Jacobs.
Another opportunity for future growth is in Europe. While Spyder is already widely distributed on the continent, Jacobs said that EU retailer consolidation is a few years behind the U.S. market. Since Spyder is already distributed through many of the major European retailers, Jacobs sees sales growing through these accounts as the market consolidates.
According to Jacobs, the European market currently accounts for around 40% of Spyders sales with the remainder coming from the U.S. and Canada, and a small piece from the Asia/Australia region.
Jacobs said that he was motivated to sell because of several events. CHB had been a partner for several years and was ready to exit and realize a return on their investment, and the resurgence in the equity markets for companies like Spyder helped him get the valuation they required.
“First I was looking for the valuation I knew the company deserved,” said Jacobs. “Second I wanted a partner that had the resources that could take Spyder to the level were aiming for, and third I wanted someone who would respect the culture of the company. Apax fills all of these needs.”
Other than the capital investment, Jacobs said that Apax brings several assets to the table. “They will give us access to information at the board level we never would have had on our own, like strategic planning. And in the future it will make sense for Spyder to launch flagship stores, and the retail experience at Apax is something that will help tremendously.”
Landau said that Apax plans to continue looking at more companies in the sports and recreation sectors. “We are very flexible. We can fund huge buy-outs or we can come in as a minority investor,” he said.
Apax generally remains invested with a company for three to seven years, but Landau said they have remained on-board as long as nine to ten years and as few as two.
As far as growth plans for Spyder, Landau said, “Management has a plan that we believe in – to continue growth as it has in the past With Performance Inc. we saw an opportunity to consolidate the market; with Spyder we see an opportunity to expand the product line. Both have significant growth opportunities.”
>>> Brings to mind the big numbers expected when others bought into ski companies in the eighties and nineties — when ski was hot…
