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July 2017

Taylormade Takeaways

taylormadetakeaways.jpg‭Another round of doom-and-gloom has descended upon the golf industry, this time cued up by adidas, which has finally found a buyer for parts of its golf division.

The headlines practically write themselves these days. Everyone in the industry knows the drill by this point—the business continues to struggle as millennials take their hard-earned money elsewhere, once again signaling the slow decline of a once-beloved sport.

But much like when Nike completely removed itself from the business equation last fall, the recent news of adidas’ departure didn’t raise many alarms within the industry.

It should be noted, perhaps above all else, that adidas’ most established market leader won’t be going anywhere anytime soon. TaylorMade—which was purchased by New York-based private equity firm KPS Capital Partners, along with the Adams Golf and Ashworth brands—will remain the dominant presence it is out on your local golf course.

Don’t forget, it was only a couple months ago that Rory McIlroy signed a $100 million endorsement deal to use TaylorMade equipment, a partnership that brought yet another PGA Tour superstar into the brand’s fold. As a result, TaylorMade now claims the top three golfers in the Official World Golf Ranking—Dustin Johnson, McIlroy and Jason Day—along with 2017 Masters winner Sergio Garcia.

And consider TaylorMade’s buyer, KPS Capital Partners, which acquired the three brands for $425 million (though several reports suggest it may actually only put up about $200 million in cash). The firm specializes in turnarounds, most notably when it gobbled up Waterford Wedgwood—the homegoods maker had been losing roughly $100 million a year—only to sell it for more than four times its purchase price just six years later. It also generated a profit from Genesee beer after just three brief years, among other revitalizations in its portfolio.

“TaylorMade is one of the preeminent golf equipment brands worldwide, with leading-edge products that consistently provide consumers a distinct performance advantage over the competition,” says KPS managing partner David Shapiro. “ ... The combination of this iconic brand and KPS’ track record of working constructively with talented management teams to make businesses better will provide the ideal foundation for TaylorMade’s future growth.”

Long story short: KPS aims to one day sell TaylorMade for far more than it acquired the brand for. That should be music to the ears of TaylorMade fans, who can expect a significant investment in the product over the coming seasons as it looks to overtake rival Callaway.

What that means for Adams and Ashworth, both of which have steadily slipped out of the spotlight over the last several years, remains to be seen.

“The TaylorMade team is deeply committed to making the most technically advanced performance-driven golf equipment, and this mission will never change,” TaylorMade CEO David Abeles adds. “Given their strategic vision, operational resources and significant access to capital, KPS is the ideal partner to help TaylorMade build upon its strong momentum.”

When considered alongside Nike’s exit from the industry, as well as Golfsmith’s demise at the hands of bankruptcy, one might assume golf’s waning popularity is to blame.

And yet, Golf Galaxy is still going strong after scooping up several Golfsmith stores. Meanwhile, the future of TaylorMade is promising as KPS begins focusing on its revival. All of it comes as the National Golf Foundation reported positive news earlier this year, with the number of beginning golfers growing to 2.5 million, a record high.

So don’t be fooled by adidas’ sale as the outside world sneers and smirks at the news. This could soon become a positive for not only the equipment industry, but the game of golf itself.

—Chris Cox

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