Orange County Business Journal

Action Sports Brands Center of Dealmakers’ Attention

Volcom, Sanuk seen starting season of acquisitions, IPOs Kari Hamanaka Sunday, June 5, 2011

Skullcandy intends to raise up to $125 million in an initial public offering, according to documents filed with the Securities and Exchange Commission.

The company reported income of $7.6 million for the ninth months through September. It reported revenue of $96 million for the same period.

“The public markets were essentially closed during the recession,” Hyden said. “Now capital markets are opening up and there’s a ton of M&A activity. There’s a lot of cash to be deployed for action sports companies that weathered the storm and developed a loyal following.”

The Volcom and Sanuk buys also are notable because the buyers came from outside the action sports market, said Vicki Dallas, a partner at Rutan & Tucker LLP in Costa Mesa and co-chair of the firm’s apparel practice group.

“There is a huge increase in the luxury, sports and lifestyle brands—a lot of companies see the youth market as huge,” Dallas said. “PPR acquired Volcom to leverage off their Puma brand. Deckers acquired Sanuk to leverage it off of Ugg and their other shoe brands as opposed to a hedge fund buy or private equity buying one of these brands.”

Deckers Chief Executive Angel Martinez said Sanuk “provides substantial growth opportunities, particularly within the action sports market where it has a large and loyal customer base of active outdoor enthusiasts.”

PPR said it expects the addition of Volcom will spur growth for its sport and lifestyle group, which is dominated by athletic shoe and apparel brand Puma.

“Volcom is arguably one of the most desirable global action sports brands with an authentic legacy rooted in surf, skate and snow sports,” said PPR Chief Executive Francois-Henri Pinault.

Action sports brands also are attractive to larger companies because they have room to grow.

“There’s a lot of visibility on sports and lifestyle,” Dallas said. “As the economy starts to turn around, there’s going to be an uptick in that [action sports] area because it’s an up-and-coming segment.”

Sellers’ Benefits

The benefit for smaller companies being bought is landing the distribution and access to capital that come with new owners.

“A lot of larger companies need these upcoming new brands and small to midsize companies need these larger companies to grow,” Dallas said. “Acquisitions are a great way to finance and increase distribution.”

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