My comment about the Line/Full Tilt release, which is obviously "feel good stoke" is that the bit about getting rid of Wall Street is ironic. I've run a public company and I've had PE "partners" in two others. The PE guys were demanding as hell. If things were not going well, it frankly sucked. Just throwing it out there. The goals of most PE firms are not that altruistic.
@ScotsSkier makes some really good points, about what has not happened with what he accurately referred to as an accumulation of brands. He and I have had many conversations over the years about some of the unique aspects of this industry, particulary relative to distribution and/or sales. Those are the growth levers, and if a PE firm was going to hold on to increase value over time that is typically what they would be all over. It has always been my experience. Sure some interest in expense contriol, efficiency, planning and positioning. But ALL geared toward growing the top and bottom lines as fast as possible. And making a case that the value should be at a much higher multiple. My experience is that their expectations would seriously conflict with business as it has been done in the ski industry. In simple terms. This is not "make a profit."
About 15 years ago, my brother and I came very close to buying the US distributorship of a pretty well known, premium ski. If we had made the deal, we could have financed it on good terms. No PE. So zero pressure there. We decided not to do it. One of the issues was actually the limitation on how much product we would have to sell. We decided it would just never be big enough.
Before making that decision, we spent a solid three months connecting with everybody who we know in the business. I probably spoke with three dozen people who run retail outlets. I spoke with many people just getting moving with that new internet thing. And I spoke with a ton of race and retail reps, and VP's of sales and operations. This was not new ground for me. I was attempting to get a handle on how fast we could move. Since we pulled the plug on the deal, I didn't learn as much as I could. I was just scratching the surface, and my head.
This is not meant as an insult to anyone. The industry is full of really nice, and fun people. What struck me was the constant referral of "my rep" and "my dealer." Buddies. A nice collegial relationship. But it was equally obvious that this was unlike any number of distribution businesses that I had run. I was used to people who busted their tails, were absolutely driven, and motivated to earn a ton on money....to then play hard on down time. And this rep world was a blend of fun, relationships, being adequate at taking care of details, having decent but frankly simple product knowledge, etc. And it was not driven by money. More like relationship managers and account managers than true sales drivers.
The notion of really pushing to increase sales volume was there in about 5% of whom I spoke to. Again, not being critical.
We worked through models all over the map, but imagine one person who might replace three, increase the total sales of those three by about 50%, and earn about 2.5 times more that the average current rep. Or more. That would involve different people. And if they failed to develop really good, genuine relationships, no chance.
My brother was thinking that no question we could do this, being a bit disruptive. His favorite line was "In the land of the blind, the one eyed man is king." Another industry vet told me "I know what you are thinking...just be the smart kid in the dumb row."
What I keyed in on was that the distribution chain is somewhat long. I'd have to worry about all of the issues of getting product actually shipped and delivered from Europe. I'd never dealt with exchange rates, customs, etc. At the other end, the myriad of problems in getting your skis on the wall of shops was becoming clear....in part because even then, a lot of retailers needed a lot of help in terms to stay in business. And this was before most of we more serious skiers began to assemble big quivers of skis.
But the more reps I spoke with, the more I realized why I have a lot of friends who are reps. Incredibly good, nice, fun passionate people. But very different that the sales beasts that I was used to.
The industry just has never moved too quickly in the world of sales and distribution. Sure, there is more technology. More automation. The changes have been along the lines of moving from independent reps, to employee reps. And that was years ago. Reps get to drive around in company vehicles, wear logo swag, ski a bit, and make friends. Looks like fun. They all have their friends in the business.
I think a seasoned PE partner with a broad background in sales and revenue growth would be challenged as to how to influence a much steeper line in these companies. Might be tough on all.
The distribution side of the business has always been in my opinion a trailing rather than leading process. Same old. I did a consulting gig for one of the bigger companies a few years ago, and the end result was that they wanted to make a number of changes but they never implemented them.....because they felt their people could not handle the change and because everybody else did it the same old way. Inertia. Industry. Powerful stuff. I remember their saying that what we discussed made so much sense, but, you know, this is just how we do it. Frustrating.
Those experiences pretty much tell me that this has to be a plan to sell off the pieces, and probably as quickly as they can make the right deals. I just think there would be a huge clash between a PE firm and those running these companies over the long haul.
If the Line guys joke about Wall Street.....I can't imagine their "conversations" about really creating value in the terms that Kohlberg would want. Could be ugly. The business is not growing. So you need to steal share otherwise. And of course the retail business changes daily.
As far as those who might be interesting in buying, my hunch is their success and interest might be in adding it/them to an existing ski business to fold it into, not to bolt it on. Logically a lot of what
@ScotsSkier discusses MIGHT work. There are logical efficiencies, but the industry moves along as is.
I'm sure that unwinding K2 and Volkl might be problematic. Undoing others, maybe less so.
I do think we'll see the group start to break up the minute the sale to Kohlberg is complete. Much like we'll see with the old CNL and some of the portfolio that will once have been known as Intrawest.
In both cases, there are buyers who today will pay a higher premium than what the total sold for for a number of the pieces. No question in my mind.
This is not going to be business as usual. The PE business makes money on deals. That simple. I have known a big player, who has a ton of money in this industry {and it's not KSL} since he was a kid. Even then, he could buy something for a nickel and sell it for $.50. His multi billion dollar firm pretty much operates on the same concept. Find the best deals, that have the highest chance of selling for that big upside.
Fascinating times....interesting to watch. I still think this has to be a very different deal for Kohlberg. On the deal that we were taking to them about, they were seriously looking an a tenfold return over five years. Does that look like the ski business?
And while not every business is driven to that end, in my experience the PE business is. I know PE guys who are heavily invested in what look like cool, and fun businesses. They would not be in them if they didn't but low, and weren't working the company's management to drive up all of the lines and make them all a bucket of money.
The money is the driver for the PE guys. It's not the same for a lot of years ski guys. And that simple mis alignment makes me think again, this is an acquire to break up and sell off deal. Not a typical PE play.
Just my hunch.
Marmot, dunno?Good question.
If it is a to be sold, which companies do you think sell first? Who will command the highest multiple? Which will they simply unload?
Another one that will be fun to watch.
