Adidas "Actively Pursuing" a buyer for Taylormade Golf

[firstbatch]

Last news said Acushnet would be an ipo sometime in 2016. Fila and the private equity group that bought it in 2011 have made some strong profits and it appeared they saw an ipo as the best way to cash out and retain equity. Things can change but Acushnet won't go cheap. Unlike TM that is struggling to find bidders at their offer.

[TomWishon]

i still think the TM brand has value, it has a longer positive history than it does negative, at least from my perspective.

 

i think you can steal it and get back to what they used to be, but anybody that tries to turn a quick profit will be sorely disappointed.

 

yes, the TM brand has value, yes it also has a longer positive history. But if you think that ANY golf equipment company could get back to what it used to be, think long and hard about the facts that will stare any new owner directly in the face.

 

Number of golfers down 20%. Number of Core Golfers, the segment that accounts for 71% of all golf spending is down 18%. The younger generations are not choosing to learn to play golf for real reasons that are unlikely to be overcome - too slow, takes too much time, takes too long to get good to the point you can enjoy it, and it's expensive. not to mention what a lot of the younger people believe - it's just not cool.

 

Then you have the behavior of the large golf companies toward the market - ever shorter product life cycles, marketing that assures better performance than the club(s) you bought 6 months ago, the $400 driver in March becoming the $199 close out in October. From the pressure to make their numbers and hit their sales forecasts, the golf companies are pissing off a lot of core golfers, and with it, the frequency of buying new clubs is decreasing.

 

More and more golfers are coming to the belief that the successive generations of new club models are no better than what they bought last year, 5 years ago. And they are right. Significant new technical advances in clubHEAD design are over, used up and what little could be done is locked down by USGA rules. There are areas within the matching and depth of fitting offerings of the clubs that can be improved, but talking about the HEAD itself, that technology is over with. Everything from a head standpoint you will see going forward will be a re hash of things already done, repackaged and marketed in a manner that makes it look "new".

 

We're coming out of an era in the business of golf clubs in which 5 companies have controlled almost 80% of the premium golf club market. 4 of the 5 companies are either publicly traded or a part of a larger publicly traded corporation, all with real pressure to keep pushing sales and profit to keep share values up. That's what forced the shorter product life cycles that used up the head technologies and brought about the hype marketing that promised improvement to push the sales, which in turn has alienated a portion of the core golfer market.

 

Besides, how many publicly traded companies make products for which only 8% of the total population of the country could even be a possible customer? Golf companies had no business going public and if you look at the history of those who did, what we're seeing today is a part of the pay off for a bad business decision 20 yrs ago.

 

This is NOT a good time to be spending $400 million to buy a shrinking golf equipment company in a shrinking golf market.

[tnord]

i agree with most of your points, but not your conclusion.

 

it's much better to buy at the bottom than at the top right? the industry absolutely does have to through a transition from its old model to something different...i agree. but that doesn't mean that ALL golf companies will lose money forever and ever. golf may be retracting a bit, but it's not going to die. the demographic shifts, societal changes, and market forces mean that mfgs will have to EVOLVE or they will die. failure is not an inevitability.

 

does anyone really imagine golf without Taylormade going forward? TM is damaged as a brand, so is Adams and Ashworth, but they still have value if someone can manage them properly. if i was a private equity firm with piles of cash sitting around doing nothing, i'd for sure be looking to buy the whole lot of it for a deep, deep discount.

 

TaylorMade, Ping, Titleist, Callaway, Nike. They will all continue to exist, but they will all have to evolve and shrink to some degree (though some will say that Ping never really changed much).

[firstbatch]

Private equity is not in the business of having "piles of cash sitting around doing nothing". Addidas targeted opening bids at 500m. No takers so we will see how low it goes. Acushnet was purchased for 1.2b in 2011. Valuations now are closer to 2b. It's not shrinking. TM has shown itself to be quite a mess in terms of profitability. To much reliance on hard goods sector of the market.

[Pigems]

Interesting thread.

[tnord]

admittedly i haven't paid THAT close of attention to things in the last 12mos or so, but last i knew there was a bunch of cash sitting on the sidelines in the investment world.

 

 

TM doesn't have to sling as much gear as it did circa 2003 to be a profitable business. they just need to go through a "correction."

[bruinsPATSirish]

Under Armour buying Titleist in no way would be a losing propositioning my opinion. They might take a little time for it to pay dividends after the initial purchase but it would do nothing but strengthen their growing corner in the golf market.

 

The Titleist golf ball sales alone would be enough. As long as they kept Titleist clubs operation the way it is they'll be golden.

[Bomber_11]

Under Armour buying Titleist in no way would be a losing propositioning my opinion. They might take a little time for it to pay dividends after the initial purchase but it would do nothing but strengthen their growing corner in the golf market.

 

The Titleist golf ball sales alone would be enough. As long as they kept Titleist clubs operation the way it is they'll be golden.

 

I tend to agree. Titleist has the best/most popular golf balls by far.

 

They also have the best wedge designer/craftsman (Bob Vokey).

 

They have the best putter designer/craftsman (Scotty Cameron).

 

They already have UA and Titleist golf's golden boy shared between them (Spieth).

 

Seems like a natural fit for the two companies.

 

Honestly Under Armour golf clothes are top notch, much like Titleist hard goods are.

 

I'd love to have a Under Armour golf bag w/ Titleist logo on it :)

[TomWishon]

 

 

it's much better to buy at the bottom than at the top right?

 

golf may be retracting a bit, but it's not going to die. the demographic shifts, societal changes, and market forces mean that mfgs will have to EVOLVE or they will die. failure is not an inevitability.

 

does anyone really imagine golf without Taylormade going forward? TM is damaged as a brand, so is Adams and Ashworth, but they still have value if someone can manage them properly.

 

Who's to say it's at the bottom now?

 

I'm willing to bet there is still room to fall even more, given what the industry stats are now and how they have been evolving. No, golf is not going to die. We're not talking about that. We're talking about whether a company that did over a billion a year at its height could ever come close to that again. I'm also willing to bet the equipment industry is going to contract even more. I don't think the commerce of the game has hit rock bottom yet. And we haven't even begun to consider the effect of a possible second recession which many feel is coming since not very much has been done to fully correct the things that caused the one in 2008.

 

Most golfers don't realize how many units it takes EVERY YEAR to sustain $600 million in golf club sales. It is a TON - millions upon millions of units. And we've lost 6 million golfers and 2.5 million from the group that accounted for 71% of the total golf spending. Bring in the other 4 companies that comprise the 80% of the market share in premium brand clubs and consider the fact they also have to do massive units to sustain their revenue EVERY YEAR.

 

That's assuming the companies all continue to introduce new models that really become compelling to a huge number of golfers to buy. That hasn't been happening over the past 1-2 yrs because they are just re-hashing already visited head technologies and there are a lot of golfers who know that to the point they won't pull out the wallet.

 

Golfer population down a lot and continuing. Core golfer population down a lot and continuing. Buyer frequency down. Fewer new golfers coming into the game. Less and less significant new club design technology.

 

You can talk about new management techniques turning it around all you want. But if the market is 18-20% smaller and of those left, if more and more of them are becoming wise to the marketing ploys of the big companies and not buying as often, all the new management skills there are can't reverse the downturn unless the other companies all sit back and let the new TM owners steal some of their market share, or unless something comes along to get more people playing this great game. The pie's not getting larger, it's getting smaller.

 

If the pundits say it would cost someone today around $400 mill to buy TM and the others with it, maybe if they wait another year they can have it for $350 or $300. How much does adidas want to dump their presence in golf?

[Nessism]

Acushnet was purchased for 1.2b in 2011. Valuations now are closer to 2b.

 

Fila would be smart to cash out now if your numbers are true. The majority of the value in the Titleist business is in ball sales and their popularity is built on a house of cards. How much longer can they continue to sell a product that's not substantially different from the competition while charging significantly more dollars? Sooner or later the market will correct itself and their cash cow will stop laying golden eggs. It's just a matter of time.

[BigHook25]

It is strange that golf is down overall, but anyone who has gone or knows about TopGolf and that place is always packed. You can tell most of the people there aren't people who actually play on a golf course. I know quite a few people who go to TopGolf quite frequently, but have either never been on a golf course or only a few times.

 

TopGolf is not cheap either.

[CosmosMpower]

Acushnet was purchased for 1.2b in 2011. Valuations now are closer to 2b.

 

Fila would be smart to cash out now if your numbers are true. The majority of the value in the Titleist business is in ball sales and their popularity is built on a house of cards. How much longer can they continue to sell a product that's not substantially different from the competition while charging significantly more dollars? Sooner or later the market will correct itself and their cash cow will stop laying golden eggs. It's just a matter of time.

 

I disagree, Pro V1 and Pro V1x balls are a household name. Good players demand it, bad players want to look like good players and think it magically gives them a better game vs another brand ball. The perception is alive and well. Pro V1 is synonymous with golf ball like Kleenex is with tissues or Xerox is with copy machines.

[CosmosMpower]

It is strange that golf is down overall, but anyone who has gone or knows about TopGolf and that place is always packed. You can tell most of the people there aren't people who actually play on a golf course. I know quite a few people who go to TopGolf quite frequently, but have either never been on a golf course or only a few times.

 

TopGolf is not cheap either.

 

Top golf doesn't require 5 hours of your time and you can get hammered and eat/drink/watch a game while you're there. It's not centered around golf it's centered around the social aspect with golf being an activity to do while you're there. Plus people that never played before can hit balls without any consequence if they hit a terrible shot, just tee up another one and let it fly.

[BigHook25]

It is strange that golf is down overall, but anyone who has gone or knows about TopGolf and that place is always packed. You can tell most of the people there aren't people who actually play on a golf course. I know quite a few people who go to TopGolf quite frequently, but have either never been on a golf course or only a few times.

 

TopGolf is not cheap either.

 

Top golf doesn't require 5 hours of your time and you can get hammered and eat/drink/watch a game while you're there. It's not centered around golf it's centered around the social aspect with golf being an activity to do while you're there. Plus people that never played before can hit balls without any consequence if they hit a terrible shot, just tee up another one and let it fly.

 

Trust me I understand what your saying, but its interesting that it doesn't seem to be converting people from hitting there into actually playing golf. Most people really enjoy hitting golf balls and the regular ranges aren't that busy, but for now TopGolf is crazy busy.

[iyi4iyian]

i think whoever taylormade ends up selling to will have to have a deal making sure taylormade players wear adidas gear...therefore under armour is out imo and bridgestone is the front runner

[kevy_boy]

Wishon buying Taylormade?

[Nessism]

Acushnet was purchased for 1.2b in 2011. Valuations now are closer to 2b.

 

Fila would be smart to cash out now if your numbers are true. The majority of the value in the Titleist business is in ball sales and their popularity is built on a house of cards. How much longer can they continue to sell a product that's not substantially different from the competition while charging significantly more dollars? Sooner or later the market will correct itself and their cash cow will stop laying golden eggs. It's just a matter of time.

 

I disagree, Pro V1 and Pro V1x balls are a household name. Good players demand it, bad players want to look like good players and think it magically gives them a better game vs another brand ball. The perception is alive and well. Pro V1 is synonymous with golf ball like Kleenex is with tissues or Xerox is with copy machines.

 

But there is no technical merit to set the product ahead. The popularity is all built on marketing and perception. That is a very fragile state.

[saltcity]

It's about patents, right? That's where a lot of a golf companies value exists.

 

TM has the driver face tech. ICT (inverted cone technology). That's what made TM.

 

Any company that wants to build or boost their driver category has to be drooling over that possibility.

[tannyhoban]

Makes me wonder, will TM eventually go by the wayside ala MacGregor?

 

And I still can't understand UA & Titleist, not saying it isn't happening. Titleist maintains pricing controls and manages the brand very well, maybe that's the attraction.

[cxx]

Acushnet was purchased for 1.2b in 2011. Valuations now are closer to 2b.

 

Fila would be smart to cash out now if your numbers are true. The majority of the value in the Titleist business is in ball sales and their popularity is built on a house of cards. How much longer can they continue to sell a product that's not substantially different from the competition while charging significantly more dollars? Sooner or later the market will correct itself and their cash cow will stop laying golden eggs. It's just a matter of time.

 

I disagree, Pro V1 and Pro V1x balls are a household name. Good players demand it, bad players want to look like good players and think it magically gives them a better game vs another brand ball. The perception is alive and well. Pro V1 is synonymous with golf ball like Kleenex is with tissues or Xerox is with copy machines.

 

But there is no technical merit to set the product ahead. The popularity is all built on marketing and perception. That is a very fragile state.

 

But that's true for many successful products. Take premium vodka's. Essentially a odorless and tasteless beverage with the same alcohol content, just different bottles and brands.

[BigHook25]

Makes me wonder, will TM eventually go by the wayside ala MacGregor?

 

And I still can't understand UA & Titleist, not saying it isn't happening. Titleist maintains pricing controls and manages the brand very well, maybe that's the attraction.

 

Patents were a lot of the reason that TM acquired Adams. I could see someone buying TM just for the patents, but I don't think they will actually keep TM products. I think they will reduce the competition and slowly get rid of what is left for TM inventory.

[new2g0lf]

i think whoever taylormade ends up selling to will have to have a deal making sure taylormade players wear adidas gear...therefore under armour is out imo and bridgestone is the front runner

 

I agree, the key to who buys TM will be based on the soft goods rights Adidas wishes to retain. I see a lot more people wearing Adidas golf shirts and shorts than those labeled as TaylorMade, especially these days. Another factor is the sponsorship contracts, there are a number of pro's sponsored by TM and Adidas, how those contracts are negotiated will have a major influence over who wants to acquire the business.

[doublehans]

Acushnet was purchased for 1.2b in 2011. Valuations now are closer to 2b.

 

Fila would be smart to cash out now if your numbers are true. The majority of the value in the Titleist business is in ball sales and their popularity is built on a house of cards. How much longer can they continue to sell a product that's not substantially different from the competition while charging significantly more dollars? Sooner or later the market will correct itself and their cash cow will stop laying golden eggs. It's just a matter of time.

 

I disagree, Pro V1 and Pro V1x balls are a household name. Good players demand it, bad players want to look like good players and think it magically gives them a better game vs another brand ball. The perception is alive and well. Pro V1 is synonymous with golf ball like Kleenex is with tissues or Xerox is with copy machines.

 

But there is no technical merit to set the product ahead. The popularity is all built on marketing and perception. That is a very fragile state.

 

But that's true for many successful products. Take premium vodka's. Essentially a odorless and tasteless beverage with the same alcohol content, just different bottles and brands.

 

ProVs vs Taylormade is interesting because it shows how much Taylormade's marketing is short-term. Yeah, there are plenty of similar performing balls to the ProV at much cheaper prices, but people will still continue to pay the ProV tax for whatever reasons. The ProV as a brand has longterm value. That won't go away anytime soon just because there are other similar products. Taylormade's marketshare tho could go away quickly as its much more dependent on ads, sponsorships, sales strategies/relationships etc. and could lose a lot of that marketshare quickly. Taylormade users dont have the same loyalty as ProV users. Which makes buying Taylormade a tougher go.

[pmcuk]

Most golfers don't realize how many units it takes EVERY YEAR to sustain $600 million in golf club sales. It is a TON - millions upon millions of units. And we've lost 6 million golfers and 2.5 million from the group that accounted for 71% of the total golf spending. Bring in the other 4 companies that comprise the 80% of the market share in premium brand clubs and consider the fact they also have to do massive units to sustain their revenue EVERY YEAR.

 

 

Are these figures world-wide or for the USA?

 

What if China develops a golf craze and a significant number of new golfers emerge? Look at South Korea and the LPGA - that's just round the corner.

 

Would it make more sense for an Asian company to buy TM? The holding company or owner doesn't have to be Euro-centric or USA-centric

 

 

.

[firstbatch]

The question remains for any prospective buyer of TM golf. With all the horsepower and success of Addidas worldwide why couldn't they make it profitable and worse yet describe the unit as an anchor around their neck? And despite the value of patents and brands how as a buyer do you make the business of selling golf clubs,balls and bags profitable and produce a profit. Apparently when you dig in to the numbers as a bidder this is an ugly business that has to be purchased for something far south of the 500m opening offer and then it will require an operational revamp on a big scale.

[cxx]

 

 

ProVs vs Taylormade is interesting because it shows how much Taylormade's marketing is short-term. Yeah, there are plenty of similar performing balls to the ProV at much cheaper prices, but people will still continue to pay the ProV tax for whatever reasons. The ProV as a brand has longterm value. That won't go away anytime soon just because there are other similar products. Taylormade's marketshare tho could go away quickly as its much more dependent on ads, sponsorships, sales strategies/relationships etc. and could lose a lot of that marketshare quickly. Taylormade users dont have the same loyalty as ProV users. Which makes buying Taylormade a tougher go.

 

I can't even keep track of which balls of Taylormade and Callaway are the premium ones. They change the names all the time. The chrome soft is the only one with an identity and it is not their best ball. Hopefully they won't change the name of that one.

[ShowMe]

 

 

ProVs vs Taylormade is interesting because it shows how much Taylormade's marketing is short-term. Yeah, there are plenty of similar performing balls to the ProV at much cheaper prices, but people will still continue to pay the ProV tax for whatever reasons. The ProV as a brand has longterm value. That won't go away anytime soon just because there are other similar products. Taylormade's marketshare tho could go away quickly as its much more dependent on ads, sponsorships, sales strategies/relationships etc. and could lose a lot of that marketshare quickly. Taylormade users dont have the same loyalty as ProV users. Which makes buying Taylormade a tougher go.

 

I can't even keep track of which balls of Taylormade and Callaway are the premium ones. They change the names all the time. The chrome soft is the only one with an identity and it is not their best ball. Hopefully they won't change the name of that one.

 

Titleist has done a great job of signing the most PGA tour players to a ball contract. That alone has been the key to their success in selling a $4 golf ball to the general public. If Bridgestone or Callaway or Taylormade had signed the most pros, then their ball would be the market leader.

[warfelg21]

ProVs vs Taylormade is interesting because it shows how much Taylormade's marketing is short-term. Yeah, there are plenty of similar performing balls to the ProV at much cheaper prices, but people will still continue to pay the ProV tax for whatever reasons. The ProV as a brand has longterm value. That won't go away anytime soon just because there are other similar products. Taylormade's marketshare tho could go away quickly as its much more dependent on ads, sponsorships, sales strategies/relationships etc. and could lose a lot of that marketshare quickly. Taylormade users dont have the same loyalty as ProV users. Which makes buying Taylormade a tougher go.

 

I can't even keep track of which balls of Taylormade and Callaway are the premium ones. They change the names all the time. The chrome soft is the only one with an identity and it is not their best ball. Hopefully they won't change the name of that one.

 

Pretty much. Everyone will keep saying "but the pros...". That's only a small fraction of why people will buy something. It's name recognition. That's why people get it.

 

Same reason people keep buying Honda Accords and BMW 3's. They haven't changed the name of the car in so long, and while it might not be the absolute best car in it's segment, the brand is so strong that people will buy it no matter what.

 

That's what Titleist has going with the ProV line. That's what other brands aren't getting. They don't get a big market share, and right away they dump the name for something new thinking the name is why it didn't work. If they hold true to the name of the ball through a couple of generations, I'm sure they'll start to build up a larger market share.

[warfelg21]

Makes me wonder, will TM eventually go by the wayside ala MacGregor?

 

And I still can't understand UA & Titleist, not saying it isn't happening. Titleist maintains pricing controls and manages the brand very well, maybe that's the attraction.

 

Patents were a lot of the reason that TM acquired Adams. I could see someone buying TM just for the patents, but I don't think they will actually keep TM products. I think they will reduce the competition and slowly get rid of what is left for TM inventory.

 

It depends who guys them.

 

Say a smaller company gets the backing, wants to keep their "brand" as the niche, but use the network from TM as the way to pull in money, then I cant see something like that happening.

 

Say, Ben Hogan buys out TM with some MAJOR financial backing (I know, very unlikely). I could see the TM name living on. They use the network and staff contracts to get their clubs into more players bags. But BH stays a smaller niche product, but piggy backs off TM network and TM makes the "clubs for the masses".

 

On the flip, if a company like Nike, PXG, Mizuno, or someone else buys TM, I can see them cannibalizing TM for the tech and patents to boost their market share where they are weak, and leaving TM with very little to work with.

 

I said on page one, I think Polo/RLX would be a great company to think about buying TM.

 

They aren't big in the golf game, but have a large enough "upscale" presence to make sense. They don't need to make a huge profit off the hard goods, in fact they could look at anything given to them in this route as a bonus. They could keep the TM name, build up a slower release cycle, position more in the Ping/Titleist territory, and grow their soft goods market.

[cgasucks]

i still think the TM brand has value, it has a longer positive history than it does negative, at least from my perspective.

 

i think you can steal it and get back to what they used to be, but anybody that tries to turn a quick profit will be sorely disappointed.

 

yes, the TM brand has value, yes it also has a longer positive history. But if you think that ANY golf equipment company could get back to what it used to be, think long and hard about the facts that will stare any new owner directly in the face.

 

Number of golfers down 20%. Number of Core Golfers, the segment that accounts for 71% of all golf spending is down 18%. The younger generations are not choosing to learn to play golf for real reasons that are unlikely to be overcome - too slow, takes too much time, takes too long to get good to the point you can enjoy it, and it's expensive. not to mention what a lot of the younger people believe - it's just not cool.

 

Then you have the behavior of the large golf companies toward the market - ever shorter product life cycles, marketing that assures better performance than the club(s) you bought 6 months ago, the $400 driver in March becoming the $199 close out in October. From the pressure to make their numbers and hit their sales forecasts, the golf companies are pissing off a lot of core golfers, and with it, the frequency of buying new clubs is decreasing.

 

More and more golfers are coming to the belief that the successive generations of new club models are no better than what they bought last year, 5 years ago. And they are right. Significant new technical advances in clubHEAD design are over, used up and what little could be done is locked down by USGA rules. There are areas within the matching and depth of fitting offerings of the clubs that can be improved, but talking about the HEAD itself, that technology is over with. Everything from a head standpoint you will see going forward will be a re hash of things already done, repackaged and marketed in a manner that makes it look "new".

 

We're coming out of an era in the business of golf clubs in which 5 companies have controlled almost 80% of the premium golf club market. 4 of the 5 companies are either publicly traded or a part of a larger publicly traded corporation, all with real pressure to keep pushing sales and profit to keep share values up. That's what forced the shorter product life cycles that used up the head technologies and brought about the hype marketing that promised improvement to push the sales, which in turn has alienated a portion of the core golfer market.

 

Besides, how many publicly traded companies make products for which only 8% of the total population of the country could even be a possible customer? Golf companies had no business going public and if you look at the history of those who did, what we're seeing today is a part of the pay off for a bad business decision 20 yrs ago.

 

This is NOT a good time to be spending $400 million to buy a shrinking golf equipment company in a shrinking golf market.

 

Amen...I totally agree what you are saying but where are you getting the stats of the number of golfers decreasing and the amount of money spent on the game?