Canyon's search for new investors has attracted takeover interest from private equity firms Carlyle Group and KKR & Co, along with buyout firms Advent International, Apax Partners, General Atlantic and Permira, according to
Bloomberg.
KKR & Co recently led a $450 million investment into Zwift, and all of the parties interested in Canyon appear intent on capitalizing on the recent surge of interest in cycling and other outdoor activities. The sale is expected to bring in up to 500 million euros ($592 million) for the company.
Canyon reported a 30% growth of global sales in 2020, which were expected to total 400 million euros ($474 million). When those numbers
were announced, Roman Arnold, one of the company's founders and the former CEO, said, "We have reached a scale at which we need additional investors for our growth and innovation plans." The company's growth over the last 5 years was helped by TSG Consumer Partners LLC, who bought a significant minority stake in Canyon in 2016.
Yeah the problem with a lot of things like bikes is that they are not consumed at a rapid pace like say pizza. Once you load up the industry with inventory you can sell because people that don't normally ride already have a bike. The other side of that is some may sell their bikes on the secondary market and not replace them. Both are potentially bad scenarios for industry forecasters. You either miss the market demand or over produce.
Most of the industry uses lines of credit, like other manufacturing industries, so they have a timeline to move finished product. It is going to be tricky to not end up with to much inventory for to long.
Wouldn't be surprised to hear more of this... There is a lot of capital in PE right now and they need to buy stuff.
You can say that again.
coughfive-10cough
I guess that money will help with that,but I agree that more Often than not,capital injections like this are the beginning of the end.
*I'm actually not looking forward to the end of Canyon.
All in all my opinion is that while they make quality product, they are kind of elitists or at the very least, unnecessarily difficult to work with.
Sure, this year has been strange and likely created abnormal levels of growth but cycling is growing, especially outside the PB world and as a whole the industry was one of the few to profit this year.
Which should raise all kinds of red flags as to what their plans are for the company.
Are you convinced that they are interested in mid- or long-term growth when buying a company at the height of its growth rate, which will never reach such a growth rate again?
Oligarch, a member of an oligarchy, a power structure where control resides in a small number of people
Oligarch (Kingdom of Hungary), late 13th–14th centuries
Business oligarch, businessmen who quickly acquired huge wealth in post-Soviet states
Russian oligarch, business oligarchs in the era of Russian privatization in the 1990s
Ukrainian oligarchs, business oligarchs after Ukrainian independence in 1991
www.vox.com/2016/5/9/11502464/gilens-page-oligarchy-study
This is the equivalent of your grandmother recognizing your talent for biking and handing you a $40,000 check to help you grow as a rider and racer. Only good can come out of this for Canyon.
KKR is smart. I'm excited to see how their involvement helps the business grow.
I guess it's the equivalent of that scenario, if your grandma expects you to bring her a lot of money down the road, and a condition of you getting that money is that a large portion of the prize money you wins belongs to her.
I guess the point I'm making is, it's not the equivalent of that at all.
They don't care about biking. They don't care about riders. They'll probably identify that cheap hardtails sell the largest volume and figure out how to manufacture them for less and get them in every Amazon and Walmart warehouse.
Maybe they can support government lobbying to improve trail access and prevent trail closures, seeing as it's all relevant to the health of their marketplace/consumers.
You're thinking of the hollywood PE. Two months ago I had a meeting with a former majority owner of a private, middle market company who started crying in our meeting because he was so proud to see how healthy his org was and how much it had grown despite his boys not wanting to take control of it. PE can ge a great thing.
@enduroFactory : Sagan rides for a team, who in turn are sponsored by Specialized (among other brands). So Specialized don't pay him anything directly. My point was more about those teams being treated by race organizers and cycling bodies. They are 100% dependent on their sponsors for survival, they get no share of the TV revenue from the sport. The entire prize fund for a Grand Tour wouldn't cover 20% of the budget required to run a WorldTour team. They have no security, and little to offer potential sponsors if they aren't competing at the highest level. They're always hit hard when economic conditions change and nothing has changed in the last 15 years to address that.
If the most influential bodies that represent riders can't organize and negotiate better conditions, then how can individuals in an even more precarious position be expected to?
"Senator Elizabeth Warren [...] has compared buyout firms to vampires, saying they bleed companies dry and "walk away enriched"."
Also, either PBers have bandied together to downvote politically sensitive comments (which would be awesome!) or something altogether more hinkey and nefarious is afoot...
www.rollingstone.com/politics/politics-news/greed-and-debt-the-true-story-of-mitt-romney-and-bain-capital-183291
It completely depends on the entity. I was involved with a company bought by Internet Brands, which is owned and directed by KKR. Lots of debt for my former company and 20% squeeze within 2 months. Within 6 months, another round of layoffs. The company is a waste land now, with profits based on short term needs so that they can position it for sale again in the next year or two. It matters not for the consumer if prices are lower if the people and the culture from which the brand was made is destroyed. Not saying Canyon should take on more PE investments, I just hope they pick a firm based on fit and not just the payout. Also, PE is all about investment optimization and profit, so what they say at the time of the deal means nothing a year later if they need the investment to perform better because other investments are performing poorly. They will do what they need to do to meet there own investor and lending bank expectations.
It’s working for them now and other bike brands, but I would stay the hell away from KKR.
I do find it interesting that these groups would be interested in buying after a period of hyper growth as revenue will likely settle over the next 12-18 months, but I assume they are privy to details I am not.
(of a ship) fill with water and sink.
"six drowned when the yacht foundered off the Florida coast"
(of a plan or undertaking) fail or break down, typically as a result of a particular problem or setback.
"the talks foundered on the issue of reform"
That is not how KKR works - the cash secures the loans that Canyon is responsible to pay off. KKR is not going to drop a half billion liquid on a bike company. Remember the burden they and their partner PE’s put on Toys R Us - it ended up bankrupting the company. KKR did not become what they are by playing nice. They are ONLY interested in returns and can care less about growing a company for the long term.
Like I said, Canyon needs to pick the right partner - KKR does not play the partner game.
And fullendurbro - they did not just go after mid or upper management, they went after tank and file in far larger numbers. The management team I was part of was the last hit.
This is true for a lot of PE firms right now. There is a lot of cash that firms have raised and their investors want to see that money go to work. Consequently, we will probably see some higher prices.
Everyone on PB just thinks they know how "big business" operates and it's all doom and gloom for little ol' us as the consumer..
A fundamental contradiction of purpose, values and mission. So while they may grow, it’s the culture that gets fecked.
Quick look through Carlyle's portfolio using WSJ Pro and you'll see that its holdings vary from a minority stake in Lyft, to majority stakes in physician staffing companies and middle market manufacturers. Carlyle has dozens of VPs for the manufacturing space on LinkedIn, so safe to say they are well equipped to help guide Canyon to a profitable future.
www.afr.com/street-talk/kkr-set-to-buy-a-majority-stake-in-cfs-20200512-p54s1u
Talk about diversification of investment.
Private equity firms love to streamline (organisational efficiencies), slash and flip.
Is this TSG anything to do with the protection brand?
bike bummers