The consumer products industry is poised to see more deal flow in 2013 as rising corporate earnings and retail sales boost buyer confidence. The outdoor industry is one area which saw significant transaction activity in 2012, with early signs hinting that momentum is continuing.
Innovative brands in the outdoor and active lifestyle niche are commanding attention from private equity and corporate buyers, with the fragmented middle market ripe for further activity. Private equity is credited as backers to many recognizable outdoor brands including Jack Wolfskin (The Blackstone Group), Newton Running (Fireman Capital Partners), Ibex Outdoor (North Castle Partners), and CamelBak (Compass Diversified Holdings). 2012 saw notable activity with Teachers’ Private Capital (Helly Hansen) and Versa Capital Management (Eastern Mountain Sports) announcing deals. 2013 is seeing a strong start to the year with Billabong International (V.F. Corporation/Altamont Capital Partners) and K-Swiss (E. Land) in play.
The desire of consumers to lead healthy, active lifestyles and collect new experiences and achievements is benefiting the outdoor industry, which grew through the recession when many other industries contracted. Brands are taking technology and product versatility to new levels and diversifying by season, category, channel, and country to enhance the bottom line, with acquisitions a key lever to growth.
Excess capital will drive transaction activity. Public outdoor companies are sitting on substantial cash reserves, while private equity will need to deploy $350 billion in dry powder as the pressure to “use it or lose it” drives buying activity. Acquirers on the hunt might look to buy versus build to fast-track entry into growing niches of the outdoor performance market, while sought-after brands can leverage the resources of a well-capitalized strategic or financial partner to propel growth.