Last week was a wild one for TaylorMade Golf, announcing its sale to KPS Capital Partners and a long-term endorsement deal with Rory McIlroy within a 24-hour period. David Abeles, CEO and president of TaylorMade, took time to chat with GOLF.com and offer insight into how these deals developed and what they mean for the company's future. As for what consumers should expect from the brand? "Number one, they can expect even better, higher performing products from our company to help them play the game better," says Abeles.
Here's the conversation covering the sale process, signing of Rory as well as Tiger, and why he's bullish for TaylorMade's future, especially in the ball business.
The interview has been edited for clarity and flow.
GOLF.com: How long has the negotiation with KPS Capital Partners been going on?
David Abeles: We've been through a very thorough, diligent process in exploring the potential sale and then ultimately choosing to sell the TaylorMade, Adams, and Ashworth brands. That process started about twelve months ago in a formal way. KPS was part of that process at the very beginning. They're an extremely professional firm that takes great pride in the diligence and research that they do. Not only in the company that they're running but certainly the industry that they're engaging in. Throughout the process, they represented the buyer that we would be most interested in aligning with.
What was it specifically about the people or KPS as a whole that made the partnership desirable for you?
Number one, it was all about people and our ability to interface together knowing that this partnership would be lasting and would have to work well. Second, they really believed in our strategy. We were very aligned in terms of the strategic direction of the organization and our growth orientation within the organization.
The other area that we were excited about in partnering with KPS was their expertise in operational manufacturing and supply chain. They love the direction where we are with product. But we felt we needed support as we continue to move forward on developing an even stronger operational capability within the organization, exploring new opportunities in our supply chain to be faster and more efficient. And their expertise in manufacturing across multiple industries was something that was very attractive to us as we continue to work on bringing broader based and deeper technologies to golf. Those are the areas of alignment that we got excited about. Fortunately through this process those materialized into a transaction.
Are you able to talk to how many suitors there might have been?
What I can tell you is there was an awful lot of interest when we publically indicated that we were going to come to market and work to sell the company. There were numerous suitors. And we narrowed it down through a very diligent process to those that were qualified and then those that were aligned with the best interests of the organization in the areas that I discussed— management and sharing the strategic vision for TaylorMade. We narrowed it down to KPS.
Are these guys and gals of KPS golfers, or are they in your eyes really strong business people?
They're both. One of the things they demonstrated to us through the process is their passion and understanding of the game. In fact, several of their partners are members of terrific clubs that we have affiliations with. I believe they bring a great competence professionally through their portfolio companies and their history of success in partnering with companies like ours, but they also have a profound passion for the game as well, which I think it only bodes well on this partnership long term.
Where will TaylorMade's headquarters be once the sale is completed?
We'll be exactly where we are right now. We don't have any plans to leave Carlsbad. We're excited about that.
How do you personally feel now that the deal is done?
I'm excited about the new ownership and our alignment with KPS. I'm also appreciative of the work that we've down with Adidas over the past seventeen, eighteen years to enable TaylorMade to become a very strong global institution in business. But I do believe that with the partnership that we're entering into with KPS, we'll have a strong growth curve as we move forward, and actually accelerate the curve that we're on right now. I'm glad we landed in a good place. It's good for Adidas as they focus on their core, which is footwear and apparel. And as we work toward building out an even bigger equipment and golf ball business, this is a very good partnership for TaylorMade.
Typically when private equities come in, they look to strip out some costs. What will that mean potentially for different parts of TaylorMade Golf moving forward?
As you can imagine, our business is constantly evolving. We had done a lot of work over the past couple of years to build a really solid infrastructure here at TaylorMade, and that's one of the things that was attractive to KPS in and around the acquisition of our company. They're buying into a very strong organization that's very well positioned for growth in the future. When we get to a point this fall when the deal closes, we will engage in deeper conversations. We're always looking for better options to become a stronger company, but at this point in time, KPS is excited about the asset they're purchasing.
It's been reported that half of the sale is in cash and half is a secured note?
We're not going to comment on any of the deal terms. Anything relative to the absolute deal terms, valuation or the construct of the deal, we don't comment on. What we've publicly submitted in our press release is our position on that.
What should TaylorMade consumers expect from the company looking into the future?
Number one, they can expect even better, higher performing products from our company to help them play the game better. They can expect that the investment that they make in our products will be a sustainable one. And they can also expect that we're going to create a lot of energy in the category of golf, to do our part in helping to continue to grow the game, and support them in whatever their personal ambitions are within the game. So, what they can expect is what they've expected in the past from us— highly innovative, highly technical, high performance products that help them play better.
Can we expect something specific right out of the gate when the sale to KPS closes?
Our short-term goals in our organization typically tie to our long-term strategy. Now, there's always some nuances in the industry that create a dynamic situation where things may change. But our short-term goals coming out of a close period would be no different than where we've been in the past. Which is one, we've got to bring great products to market, unequivocally the finest products to market. Two, to be highly dedicated as we always have been, to servicing the golfer and servicing our trade partners, which is critically important. And three is the continued alignment with not only Tour professionals, but also golf professionals across the country and around the world. Those are the things that we're going to focus on.
Let's shift to Tiger and Rory. Was KPS aware that Tiger and Rory were prospective endorsement contracts?
What was most important in every level throughout the continuum of this discussion with KPS is that we were aligned strategically. Part of our core strategy is that if we build the greatest products and highest performing products in the world, we believe that the best players in the world will choose to play TaylorMade. And we're seeing that right now more than ever. So one, we were aligned strategically in the importance of the Tour relative to the validation of the performance claims and attributes that we build into all of our equipment and now importantly our golf ball. KPS certainly was aware of our engagement with Tiger and, more so, our engagement with Rory, because that's the most recent one. They too are extremely excited about having both of those athletes onboard, on top of having the top three players in the world and six of the top twelve.
If Tiger is not playing, can you still reap the benefits of him being one of your endorsees?
I think any affiliation with Tiger Woods at any level from an equipment standpoint is a good affiliation. You've got arguably one of the greatest players in the history of the game who has an audience that is more than meaningful and very excited and hopeful that he can play and play at a high level again. And I know Tiger is working as hard as he can to get back because he is one of the fiercest competitors we've ever met and one of the fiercest competitors I think golf and sport has ever seen. And he'll be involved with our company in terms of thinking about new products and new technology, not only for Tour players but players at every skill level. We're optimistic that he will come back. And we're looking forward to his return when that time is right. But we're very, very excited about our partnership with Tiger and his involvement here at TaylorMade.
How did that relationship with Rory start and ultimately close?
Last August, when one of our competitors decided to exit equipment and golf balls, it was a very interesting moment in time in the industry because very rarely do you see a group of highly talented Tour players that have the option to play whatever products they choose to play to benefit. Rory was one of those key free agents that was coming out of an equipment and golf ball situation where he could now test pretty much anything he wanted. And one of the things we've learned to appreciate, really respect and admire about Rory, is not only his intelligence coupled with his golf capabilities, but the process that he deployed in his own right to determine what was the best product mix for him. Over the period of the last six months we've been working with Rory, as others have, as he started to fine-tune his decision, testing combinations of equipment and golf ball together. And in the end, TaylorMade was simply head and shoulders above the rest. What he was really compelled about beyond metal woods was the significant technical improvements of the TP5x golf ball. And he said that in his press conference the other day.
Are there specific goals in terms of market share or what you're hoping to achieve within the next few years with the golf ball?
We personally think here at TaylorMade that golf is a product-driven industry. We won't bring a product to market across any category that isn't measurably better than what we've had before and measurably better than the competitive set. That's really the credo in our organization. And we've been working on a five-piece construction golf ball, and this golf ball in particular, for the better part of the last decade. When we realized what we had, a golf ball that goes faster, that launches higher, that has better downward spin variables, and still chips and putts as well if not better than any golf ball in the business, we said ‘wow' we've opened up a scenario now for TaylorMade to be in the golf ball business in a big way. We believe today that we lead in performance with the golf ball, and we believe over time we'll build a bigger business as a result of golfers realizing we lead in performance. So while we do set internal targets that we don't disclose publicly, we're very bullish and excited that we have a significantly better performing golf ball than what's in the market today. And now that's being validated and we're talking about that through all of these great players in the world that are in TaylorMade that in many regards some golfers may not have even recognized that they're in this golf ball. And that's what we're hearing every day. We're hearing, ‘hey I just assumed that other golf balls were as good and I knew you make a great product. Now I recognize you make a better product and the best players, and really the best players—the top 3 players in the world—are choosing TaylorMade equipment and TP5x golf balls because they believe that it's the best product in the world.' We do believe in this organization and how we're hardwired around performance that we have the opportunity over time to challenge for market share leadership in this category.