Everything you need to know about the TaylorMade sale (but were afraid to ask)

Friday May 12th, 2017
One of the leading companies in golf equipment, TaylorMade was sold by Adidas earlier this week.
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What a week it’s been for TaylorMade Golf. On Tuesday, the company announced the signing of Rory McIlroy to a long-term endorsement deal. Twenty-four hours later news broke that the Adidas Group had reached an agreement to sell TaylorMade Golf to KPS Capital Partners for $425 million. Here are six things to know about the sale.

Who is KPS Capital Partners?

The private equity firm currently manages $5.3 billion in assets. It has active investments in companies who manufacturer car brakes, industrial and consumer thread, specialty paper products, wire harnesses for home appliances, and home furnishings, to name a few.

Is this sale good or bad for TaylorMade?

Let’s first consider why TaylorMade was on the block—its profitability was underperforming the rest of the Adidas Group. One can assume there may be “downsizing” in the short term to get overhead more in line with current sales revenues. Of course, that should get the company moving toward a stronger balance sheet in the medium- to long-term.

Do potential synergies exist with other KPS brands?

One exciting thing about this acquisition is the prospect of shared resources. Each brand in the portfolio has its own intellectual property, manufacturing techniques and suppliers. Though it might not be as simple as partnering with a larger sporting goods company (Adidas), there’s room for newfound efficiencies, manufacturing techniques and IP that can help TaylorMade in the future.

What does the sale mean for TaylorMade's management team?

Early indications are that KPS will keep the management team, led by David Abeles, CEO and president. “He’s a great custodian for the brand,” says Leigh Bader, co-owner of Joe & Leigh’s Discount Golf Pro Shop and Joe & Leigh’s Pine Oaks golf course in South Easton, Mass. “I’ve known David for 20-plus years and believe he would’ve left [the company] on principal if he felt the new situation wasn’t going to be good for the brand and the people of TaylorMade.”

What does the sale mean for TaylorMade’s business?

Since taking over in February 2015, Abeles spearheaded the movement to extend product lifecycles. It’s unknown whether KPS will push for new, different and possibly faster ways to distribute product.

Recently, TaylorMade’s embarked on more direct-to-consumer (DTC) sales through its e-commerce site. Though the majority of holdings within the KPS portfolio don’t sell in this manner, we’d expect TaylorMade to continue (even boost) its commitment to DTC in the future. TaylorMade might also expand into the high-end luxury market segment and compete with companies like PXG and Miura. Custom fitting and usable, built-in technologies are opportunities for growth as well.

What does the sale mean to the equipment business—and you?

Probably not a whole lot will change. TaylorMade is an established market leader in golf equipment. Assuming the current management team stays on, the company will remain a product-focused company. Says Dick Sullivan, president and CEO of PGA TOUR Superstore: “We’re off to a solid start to the year and TaylorMade, in particular, is showing very strong performance from their M1 and M2 drivers, irons, to the recent signing of Rory McIlroy, to the excitement over their new golf ball. These are all positive signs for TaylorMade."

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