A majority ownership of Timbuk2 Designs was acquired by several individual investors and led by VMG Equity Partners and Capital Logic Partners. According to sources close to the deal, the company was sold for over $20 million, a considerable premium over the $15 million in sales reported in 2004.
Timbuk2 remains independent and privately-held, and its current CEO, Mark Dwight, will continue to lead the company. Dwight told BOSS that he remains a significant shareholder in the business, as do all of the original individual investors who acquired the company three years ago. He said that the real purpose of the deal was to cash-out the private equity firm, Pacific Community Ventures, and provide the company with “their first big win.”
PCV is a community development, private equity firm that focuses on building urban communities through business investment. The firm is currently organizing another fund, and the successful sale of Timbuk2 is expected to help with the fund raising involved. PCV saw a 4.5x return on their original investment due in large part to the team at Timbuk2 and their efforts to reorganize operations, expand the product line and distribution, and ultimately make the company profitable again.
“Investment funds are judged on the quality of their investments, and the ability to secure financially successful exits,” said Penelope Douglas, PCV co-founder and president. “This double-bottom line success will have important implications for the credibility of the Community Development Investment movement as a whole. This is proof the model works.”
In addition to providing a healthy return for its investors, the deal was structured to give Timbuk2s non-management employees considerable bonuses. The company was able to distribute more than $1M to 40 employees in a one-time bonus. Some of the bonuses for long-time employees were up to 2x their annual pay. PCV will conduct on-site financial management workshops for employees receiving cash payouts to help them understand options for investing and saving.
Looking ahead, Dwight feels that this latest round of investment will provide Timbuk2 with the capital needed to fund future growth. “There are plenty of $100 million lifestyle brands out there and I think we have the brand and the team to take us to that point,” he said. “There is still a lot more growth opportunity for us in the bag market with computer, outdoor, and bike I also think that the brand could be taken into adjacent categories like footwear and apparel.”
Dwight does not see this as a licensing opportunity and would prefer to grow the brand in a controlled manner. “We are not going to pursue a frenzy of licensing simply to achieve a financial goal,” he said. “Were in it for the long-haul.”
Debt financing for the deal was provided by the San Francisco branch of CapitalSource Finance LLC. Investment advisory services were provided by North Point Advisors of San Francisco.
