Adidas has finally found a buyer for TaylorMade after more than a year of searching. Who ponied up the reported $425 million? Why, some private equity firm you’ve never heard of: KPS Capital Partners LP.
The deal is expected to be finalized by late 2017. Certainly, the timing is interesting, coming just a day after TMag inked world No. 2 Rory McIlroy to a multi-year deal. The $425 million sale will be half cash, half “secured note and contingent considerations” (whatever that means). Adidas had owned TaylorMade since 1997.
“This is the beginning of an exciting new era for TaylorMade, and our entire management team is excited to partner with KPS in this next phase of our growth and continued development of our brands, business and people.”
David Abeles, Chief Executive Officer of TaylorMade
KPS’ website says the company “generates investment returns by structurally improving the strategic position, competitiveness and profitability of its portfolio companies, rather than primarily relying on financial leverage.” In other words, it seems KPS take an active role in the management of the companies it invests in, rather than just providing financial backing.
This could be what the equipment giant needs. After grossing $1.7 billion in sales in 2013, those numbers have dropped dramatically in recent years. Painting a dire picture, a February piece in the New York Post said TMag has been losing in the ballpark of $100 million per year. TaylorMade’s market share of woods on Tour is industry leading, but the company has largely failed to gain traction outside of being the No. 1 driver on Tour.
In other words, a mere injection of cash wasn’t what the company needed: Having already tried the “flood the marketplace with product” and “extremely short product life cycles” to no avail in recent years, the company needs a strategic overhaul, unless they merely want to be a driver and wood shop.
After Callaway’s decision to roll out Callaway Media Productions and double as a content shop has paid dividends for that company, TaylorMade may be keen to follow suit or innovate in another direction. Indeed, they will need to do something bold to buck larger industry trends.
Adidas, for its part, will continue in the golf shoe and clothing business. So don’t worry, you’ll still see Dustin Johnson, Jason Day, and Sergio Garcia sporting the three stripes.