May 2019www.capstoneheadwaters.com

Year-to-date (YTD) ended May 6

Source: Capital IQ, Pitchbook, FactSet, and Capstone Headwaters Research

Capstone Headwaters

US outdoor activity has been robust in recent years, as consumers with

heightened levels of disposable income pursue activities that promote healthy

lifestyle trends. As a result of rising disposable incomes and increased

consumer confidence, retail sales in March increased 1.6% compared to

February and 3.6% year-over-year (YOY), according to the US Census Bureau.1

Continued sales growth and the pervasive impact of the health-conscious

consumer are expected to bolster the Recreational Products industry by driving

demand for products that support active, outdoor enthusiast lifestyles.

Strategic operators have continued to account for the majority of transaction

volume in the Recreational Products industry, accounting for 79.2% of the 53

total transactions announced or completed year-to-date (YTD) 2019. The buyer

breakdown in 2019 follows levels seen in the same period 2018, with strategic

buyers accounting for approximately 80% of YTD 2018 deal volume. However,

companies that appeal to a broader customer base and have established brand

recognition and trust have also attracted interest from private equity buyers.

For example, KPS Capital Partners has acquired the fitness business of

Brunswick Corporation (May 2019, $490 million). Brunswick’s fitness operations

consists of five brands, including Life Fitness, a global leader in commercial

fitness and game tables. The acquired brands provide KPS with a holding that

has strong established brand-positioning, sales channels, and customer bases.

TABLE OF CONTENTS

M&A Overview

Trend Highlight

Select Transactions

Public Company Data

Firm Track Record

RECREATIONAL PRODUCTS

Q2 2019

Buyer Breakdown: Recreational Products

MERGER & ACQUISTION OVERVIEW

CONTRIBUTORS

Sophea Chau

Director

617-619-3307

schau@capstoneheadwaters.com

Jacob Voorhees

Head of Global M&A

617-619-3323

jvoorhees@capstoneheadwaters.com

15.1%

62.2%

5.7%

17.0%STRATEGIC

Public

Private

FINANCIAL

Direct

Add-on

TREND HIGHLIGHT: OUTDOOR ENTHUSIASM

A growing number of consumers have placed health at

the forefront of their lives, influencing spending habits

and leisure activities across the Recreational Products

industry. Outdoor activity participation rates in the US are

indicative of this as leading outdoor activities include

running, jogging, and trail running (19%), fishing (17%),

biking (16%), hiking (15%), and camping (14%), according

to the Outdoor Industry Association’s 2018 Participation

Report.2 Notably, the most recent data reveals that these

YOY participation rates grew at a combined average of

4.7% from 2016 to 2017. The expected expansion in

participants along with favorable macro dynamics have

contributed to the robust state of the Recreational

Products industry.

Further reflecting healthy participation and demand in the

Outdoor Recreational Products industry was Clarus

Corporation’s (Nasdaq:CLAR) Q1 2019 earnings report

which indicated a 15% YOY increase in revenue.3 Clarus is

an outdoor and consumer-branded products company

with brands that serve the outdoor enthusiast such as

Black Diamond (outdoor performance equipment and

apparel), PIEPS (beacon technology for avalanche safety),

and Sierra (bullet manufacturer). Revenue of $61.2

million, largely driven by 16% growth in Black Diamond,

and the subsequent 69% increase in adjusted EBITDA

were record-breaking figures for the company in Q1 2019.

Steady demand and subsequent sales in the Outdoor

Activity industry have promoted acquisitions by leading

operators seeking to expand and diversify their current

product offerings in high-growth segments. Notably in

January, golf-centric company Callaway Golf Company

(NYSE:ELY) closed its largest acquisition to-date, acquiring

Jack Wolfskin for $473.3 million, equating to

approximately 12.0x LTM EBITDA. Founded in 1981 and

based in Germany, Jack Wolfskin is a premium outdoor

apparel, footwear, and equipment brand.4 The purchase

allows Callaway to penetrate the outdoor activity end-

markets as well as reduce the seasonality of their

business. The acquisition is also indicative of Callaway’s

strategic initiative to expand beyond their primary

segment in order to diversify both their customer and

product base as well as capitalize on consumer trends.

Outdoor recreational products companies have utilized

acquisition strategies to complement existing products,

expand into new markets, and broaden their customer

demographics. Notably, SRAM, a bicycle manufacturer,

acquired the power meter brand PowerTap (April,

undisclosed) to expand its technology bicycle component

business; Hala Gear, a designer of paddle boards for

surfing, acquired e-commerce retailer Colorado Kayak

Supply (February, undisclosed) to expand its operations

beyond B2C sales; and power sport vehicle provider

Polaris Industries (NYSE:PII) acquired Larson Boat Group

(January, undisclosed) to further establish itself in the

boating industry after its market entrance in 2018.

AVERAGE YEAR-OVER-YEAR GROWTH

IN LEADING OUTDOOR ACTIVITIES4.7%

Recreational Products | Q2 2019

Outdoor Activities Participation Rates

(% of US Population)

8.0%

12.0%

16.0%

20.0%

24.0%

2007 2009 2011 2013 2015 2017

Running/Jogging/Trail Running Bicycling

Fishing Hiking

Camping

2

Key Investment Considerations

Source: Outdoor Industry Association (left)

Brand Reputation

Brands with strong social media

presences and renown product

quality and durability.

Inventory Management

Minimal seasonality and

efficient inventory management

can reduce uncertainty of

projected earnings.

Omnichannel Sales

Diversified sales channels with a

strong e-commerce network are

preferred for buyers looking to

expand into new segments.

Capturing Trends

Capturing consumer trends and

the ability to appeal to a

broadened customer base.

Capstone Headwaters has identified key characteristics below that

support improved valuation and attractiveness to potential buyers.

SELECT TRANSACTIONS

3

Date Target Acquirer Target Business Description

Enterprise

Value (mm)

EV / LTM

Revenue EBITDA

05/06/19Fitness Operations

of BrunswickKPS Capital

Produces branded commercial fitness equipment and

game tables. $490.0 - -

05/03/19 IZON Network SoMo AudienceDevelops golf-centric technology, including GPS tablets in

golf carts. - - -

04/18/19 Parker Marine Correct Craft Manufactures and supplies boats. - - -

04/17/19 Sail & Ski Center MarineMaxOperates four stores in Texas, selling boats, water sports

products, and snow sports products. - - -

04/15/19 Roadtrek RV Rapido Manufactures branded recreation vehicles. - - -

04/11/19PowerTap brand

of Saris CyclingSRAM

Produces bicycle power meters, pedals, chainrings, and

wheelsets. - - -

04/04/19 Custom InkGrant Hill Partners;

HarbourVest Offers custom apparel for teams and groups. - - -

04/02/19 VOLCOM Authentic Brands Designs, markets, and distributes branded active and

streetwear products as well as boardsport products. - - -

03/28/19 Labellamafia Pacífico Sul Provides activewear internationally for men and women. - - -

03/25/19 Kicks USA DeichmannOperates retail stores as well as an e-commerce platform,

selling athletic apparel and footwear. - - -

03/12/19Sugar Wheel

WorksBreadwinner Cycles Manufactures bicycle wheels. - - -

03/08/19 Fly Pedals Spin Ventures Produces clipless bicycle pedals. - - -

03/07/19 Pacific NautiquesLake Union

Sea RayManufactures wake boats and other water sport products. - - -

03/05/19 StaCyc Harley-DavidsonProduces electric-powered two-wheel bikes designed for

children. - - -

02/26/19Blue Ridge

ArsenalBlackfish Armory

Operates shooting sports stores, providing firearms and

firearm accessories. - - -

02/19/19 CytoSport Pepsi Produces sports-oriented nutritional products. $465.0 1.6x -

02/14/19Colorado Kayak

Supply

Twitch (dba: Hala

Gear)

Operates an e-commerce website which sells paddle

boards, kayaks, and other hiking and camping products. - - -

02/05/19 Club ChampionLevine Leichtman

CapitalProvides nationwide club fitting services for golfers. - - -

02/04/19 All Ball Pro Gladiator Lacrosse Manufactures and sells sports equipment for ball sports. - - -

02/01/19 Sports Illustrated TPG Capital Publishes a leading sports magazine. - - -

01/22/19 Larson Boat Group Polaris Industries Manufactures boats under five brands. - - -

01/17/19Racetrackers

Enterprises

Running Awards

and Apparel

Supplies customized technical apparel as well as golf

apparel. - - -

01/17/19 Advanced Sports HTM USA Designs and sells premium bicycle brands through a global

distribution network. $21.8 - -

01/08/19 Coates RV CenterCamping World

HoldingsOperates as a recreation vehicles dealer. - - -

01/05/19Kialoa Canoe

PaddlesWerner Paddles

Produces canoe and paddle board paddles as well as water

board apparel. - - -

Source: Capital IQ, Pitchbook, FactSet and Capstone Headwaters Research

Recreational Products | Q2 2019

PUBLIC COMPANY TRADING & OPERATING DATA

4

Price % 52 Wk Market Enterprise LTM EV / LTM

Company 05/06/19 High Cap Value Revenue EBITDA Margin Revenue EBITDA

Brunswick Corporation $52.78 75.6% $4,595.9 $5,827.7 $5,223.7 $673.2 12.9% 1.1x 8.7x

Callaway Golf Co. $17.37 70.4% $1,1647.0 $1,643.2 $1,242.8 $152.1 12.2% 1.3x 10.8x

Clarus Corporation $13.83 98.9% $411.5 $431.2 $212.1 $18.2 8.6% 2.0x 23.7x

Dorel Industries Inc. $8.79 43.5% $288.7 $749.3 $2,619.5 $119.0 4.5% 0.3x 6.3x

Escalade Inc. $12.05 79.0% $174.4 $174.6 $175.7 $16.5 9.4% 1.0x 10.6x

Johnson Outdoors Inc. $86.70 80.8% $864.8 $796.6 $544.1 $73.7 13.5% 1.5x 10.8x

Lafuma SA $23.52 84.0% $167.0 $147.4 $194.5 $12.2 6.3% 0.8x 12.1x

Mean 9.6% 1.1x 11.9x

Median 9.4% 1.1x 10.8x

Harmonic Mean 8.4% 0.8x 10.3x

EV = enterprise value; LTM = last twelve months

$ in millions, except per share data

NM = Not Meaningful

26.1%

46.5%

35.4%

21.6%25.3%

44.5%40.6%

12.9% 12.2%8.6%

4.5%9.4%

13.5%6.3%

0%

10%

20%

30%

40%

50%

60%

Brunswick Callaway Golf Clarus Dorel Industries Escalade Johnson Outdoors Lafuma

Gross Margin % EBITDA Margin %

Last Twelve Month Margin Performance

Last Twelve Month 1-Year Revenue Growth

6.9%

18.5%

24.3%

1.6%

-1.1%

2.8%

5.8%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Brunswick Callaway Golf Clarus Dorel Industries Escalade Johnson Outdoors Lafuma

Source: Capital IQ and Capstone Headwaters Research as of May 6, 2019

Recreational Products | Q2 2019

FIRM TRACK RECORD

5

has been acquired by

strategic joint venture

financial advisory

a portfolio company of

has been acquired by

has divested has been acquired by

has been acquired by

a portfolio company of

has been acquired by

has been acquired by

has been acquired byhas been acquired by

has been acquired by

a portfolio company of

has been acquired by

has been acquired by

has been acquired by

Recreational Products | Q2 2019

1. US Census Bureau, “Advance Monthly Sales For Retail and Food Services,” https://www.census.gov/retail/marts

/www/marts_current.pdf, accessed May 10, 2019.

2. Outdoor Industry Association, “2018 Outdoor Participation Report,” https://outdoorindustry.org/resource/2018-outdoor-

participation-report/, accessed May 10, 2019.

3. Clarus Corporation, “Clarus Reports Record First Quarter 2019 Results,” https://www.claruscorp.com/press-

releases/detail/173/clarus-reports-record-first-quarter-2019-results, accessed May 10, 2019.

4. Cision PR Wire, “Callaway Golf Company Completes Acquisition of Jack Wolfskin, A Premium Outdoor Apparel Brand,”

https://www.prnewswire.com/news-releases/callaway-golf-company-completes-acquisition-of-jack-wolfskin-a-premium-

outdoor-apparel-brand-for-418-million-300772897.html, accessed May 10, 2019.

6

CITATIONS

Disclosure: This report is a periodic compilation of certain economic and corporate information, as well as completed and announced merger and acquisi-

tion activity. Information contained in this report should not be construed as a recommendation to sell or buy any security. Any reference to or omission of

any reference to any company in this report should not be construed as a recommendation to buy, sell or take any other action with respect to any security of

any such company. We are not soliciting any action with respect to any security or company based on this report. The report is published solely for the

general information of clients and friends of Capstone Headwaters. It does not take into account the particular investment objectives, financial situation or

needs of individual recipients. Certain transactions, including those involving early-stage companies, give rise to substantial risk and are not suitable for all

investors. This report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied

upon as such. Prediction of future events is inherently subject to both known and unknown risks and other factors that may cause actual results to vary

mate- rially. We are under no obligation to update the information contained in this report. Opinions expressed are our present opinions only and are

subject to change without notice. Additional information is available upon request. The companies mentioned in this report may be clients of Capstone

Headwaters. The decisions to include any company in this report is unrelated in all respects to any service that Capstone Headwaters may provide to such

company. This report may not be copied or reproduced in any form, or redistributed without the prior written consent of Capstone Headwaters. The

information contained herein should not be construed as legal advice.

Recreational Products | Q2 2019

RECREATIONAL PRODUCTS REPORT CONTRIBUTORS

7

Jacob Voorhees

Head of Global M&A

jvoorhees@capstoneheadwaters.com | 617-619-3323

Jacob brings over 15 years of experience to the Capstone Headwaters investment banking team. As one

of the founding members of Capstone Partners, he helped build Capstone’s brand over the past decade

until the merger with Headwaters MB in late 2017. Today, Jacob serves as the Co-Head of Investment

Banking for Capstone Headwaters and is responsible for overseeing the Northeast Region. Jacob has

proved himself to be a talented deal maker with an unyielding commitment to his clients and has

established himself and our firm as a leader in various industries including education and training,

consumer products and business services sectors. He is a highly accomplished leader and serves as a

strong mentor and role model to our developing professionals.

Formerly, Jacob was with Andersen Corporate Finance LLC, where he focused his efforts on the

software and direct marketing industries. He started his career in New York City with Rabobank

International, a multi‐national Dutch investment bank in Utrecht, the Netherlands. While at Rabobank

International, Jacob worked in the mergers and acquisitions group focusing on cross‐border transactions

in South and Latin America in the consumer products, food & beverage industries. Additionally, Jacob

founded Sophie’s Fund which provides college scholarships and financial support to homeless youth.

Jacob received an MBA from the Sloan School of Management at Massachusetts Institute of Technology

(MIT) and a BS from Cornell University. He is qualified as a General Securities Representative.

Sophea Chau

Director & Head of Recreational Products

schau@capstoneheadwaters.com | 617-619-3307

Sophea has more than 13 years of experience in mergers & acquisitions, private placements and financial

advisory services. Her responsibilities include asset positioning and strategy articulation, providing

financial and valuation analysis, and performing due diligence. Prior to joining Capstone Headwaters,

Sophea was an analyst at FTN Midwest Securities, a full-service investment banking firm based in

Cleveland. While working in their New York office, she focused on M&A advisory for middle-market

companies in a variety of industries, including consumer products, healthcare, and marketing &

advertising.

The M&A Advisor named Sophea to its prestigious “Emerging Leaders” (previously, “40-UNDER-40”) deal

makers list in 2018. Sophea is on the Board of the Columbia Alumni Association of Boston and holds a

BA in Economics from Columbia University.

Recreational Products | Q2 2019

MIDDLE-MARKET BOUTIQUE INVESTMENT

BANK OF THE YEAR

2019

US - DEBT FINANCING ADVISORY OF THE YEAR

2018

US MIDDLE MARKETS INVESTMENT BANK OF THE YEAR

2018

INVESTMENT BANKING FIRM OF THE YEAR

2019

TURNAROUND AWARDS

12

www.capstoneheadwaters.com

Capstone Headwaters is an elite investment banking firm dedicated to serving the corporate finance needs of middle market

business owners, investors and creditors. Capstone Headwaters provides merger & acquisition, private placement, corporate

restructuring and financial advisory services across 16 industry verticals to meet the life cycle needs of emerging enterprises.

Headquartered in Boston, MA and Denver, CO, Capstone Headwaters has 19 offices in the US, UK and Brazil with a globalreach that includes over 450 professionals in 40 countries.

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