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Adverse water sports apparel market leads to sell-outs
18
Mar '13
Adverse conditions in the water sports apparel market are leading to a rise in industry takeovers.

Many companies enjoyed massive growth until the mid-2000s but the global economic crisis has depressed sales and reduced profit margins. In addition, lower participation rates in some water sports and changing consumer tastes have had a knock-on effect on demand and sales of water sports apparel.

As a result of weaker demand, major players in the water sports apparel market have been forced to cut back on their operations and re-evaluate their business strategies. Also, a number of players have experienced declines in their valuations, and some of those declines have been quite dramatic.

Consequently, large corporations and private equity groups have taken advantage of these lower valuations by launching bids for struggling brands and acquiring them.

Volcom, for example, was acquired by PPR, a France-based luxury goods and retail distribution group, in May 2011.

Another company which has received a number of takeover offers is the Australian surfwear company Billabong.

In December 2012 the head of Billabong’s Americas division, Paul Naude, and two bid partners    -- the USA-based private equity firm Sycamore Partners and Bank of America Merrill Lynch -- offered a $526.8 million (US$553.1 million) for Billabong.

However, in January 2013 VF Corporation and its private equity partner Altamont Capital matched Paul Naude’s bid with an offer of a $526.8 million. The two bidding consortiums are currently carrying out a due diligence process.

Another company up for sale is Rip Curl, one of Billabong’s major Australia-based rivals. The company is said to be considering a number of unsolicited offers.

In a further bid to boost sales in this difficult economic environment, companies in the water sports apparel market are continuing to develop garments which enhance comfort and improve a wearer’s safety. Companies which have paved the way in improving the functionality of their water sports apparel include Billabong, Musto, O’Neill, Patagonia and Quiksilver.

These and other companies will continue to focus their efforts on increasing the number of innovations they bring to consumers. In this way, they hope to differentiate themselves in what has become an overcrowded marketplace.

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