As you may recall from the last time we discussed the potential sale of TaylorMade, adidas Group had entertained a round (I’m told two, actually) of offers for the company before announcing that a final decision would be made after Q1 and following a strategic review.
Q1 is complete, as is that review, and in no uncertain terms adidas Group CEO, Herbert Hainer, has made it clear that TaylorMade, along with Ashworth and Adams Golf, is for sale.
The short version of the adidas plan is for the company to sell its three golf brands, while increasing its focus on apparel and footwear. While that’s likely true across the whole of the company, the takeaway is that adidas Golf – and the golf shoes and apparel it produces – will remain under the adidas umbrella.The TaylorMade portion of TaylorMade-adidas Golf will be sold. The adidas part won’t.
What Buyers Would Be Getting
Despite a rocky couple of years, TaylorMade remains the #1 Driver brand in golf (both on tour and at retail), it’s market shares within its key categories (metalwoods and irons) are trending in the right direction, and while the company was down 1.4% (Year over Year) for Q1 on a currency neutral basis, most, if not all, of that can be attributed to declines at Ashworth and Adams where there are basically no products to sell.
Profit margins were also lower.
Mr. Hainer is almost certainly right, however. There’s plenty of upside for the TaylorMade brand, provided the company can be had for the right price. We’ve heard 500MM as the broad ballpark number that adidas had originally hoped to get for the company. Our insiders suggest that without the higher margins brought by adidas footwear and apparel, the actual value of the hard goods division is likely substantially less.
Potential Buyers
We reported earlier that Bridgestone was a potential buyer. We’re told the company had dropped out after the first round of bidding, and we’re not sure they’ll jump back in now that things are a bit more official.
Despite persistent rumors, and I suppose wishful thinking, we don’t believe Under Armour is potential buyer as it’s unlikely adidas would sell to a major competitor.
The most likely buyer will emerge from the private equity world. That was the case with 5 of the original 6 bidders we heard about.
What It Means for the Industry
Without knowing who the buyer will be, it’s impossible to know what impact it will have on how TaylorMade does business. The backing of adidas is what gave TaylorMade the marketing spend that helped propel it to the top of the industry. The new owners would likely concentrate on steady growth and profitability, which would likely mean a more restrained TaylorMade with strategies that more closely mirror some of it’s more revenue-focused competitors.
Time, as it always does, will tell, but the will they or won’t they (sell TaylorMade) part is over. Now it’s simply a matter of when and to whom.
Stay Tuned.
Pete the Pro
8 years ago
The news that Taylor Made is for sale is nothing new. It has merely become less speculation and more fact. The awful truth, whether we like it or not, is that the retail golf industry and manufacturing / Wholesale side is not in great shape. Some markets are bouyant, others are stable but significantly down on previous years. It’s mixed, but catch the downturn and the financial side starts to hurt. I know a lot about this, having fincanced a golf shop throughout the recession. Spare a moment to transform yourself into a golf shop owner for a moment. You may have to work hard for zero wages, fund your life from other resources and ride out the storm. Constant negotiations about price because the internet delivers price visibility. However, the consumer cannot differentiate great webshops from the ones that advertise products they don’t have, or items they cannot even get because they don’t have a trade account. Or the fake product. If the golfer wants custom fitting, great brands, amazing technology, friendly service, great after sales, a stunning website and all the rest that goes into it, beating the price down in the store doesn’t contribute to the package that makes it viable for manufacturers and retailers. Sure, it’s great for the contributors to beat on about how they bought it on e-bay at 60% off but don’t be surprised when change has to occur. It is often conveniently forgotten that the Rules of Golf limit what can be done to a golf club and ball and we hit the limits years ago. Consumers happily pay up for other products (car, i-phone, meal out) without excessive thought and beating the service provider on price. Just needs to be the same in golf.