SWIM/SURF
Investors See Surf, Streetwear Poised for Growth
Surf’s up for dealmaking for action-sports and streetwear brands.
In the past month, private-equity companies have announced investments in the brands and retailers in this market.
Altamont Capital Partners, the Palo Alto, Calif.–headquartered private-equity firm that was a leading suitor to take over surf giant Billabong International Ltd. last year, announced that it made investments in Los Angeles–based streetwear and skate brand Huf Worldwide Inc. and in Brixton, which is headquartered in Oceanside, Calif. The Altamont announcements called the investments “partnerships,” in which the equity company will support the growth of the brands. The Huf deal was announced on Oct. 31. The Brixton announcement was made on Nov. 4.
Quiksilver Inc. announced on Nov. 11 that it sold a majority interest in e-commerce retailer Surfdome. Australian online retailer SurfStitch acquired Quiksilver’s interest in Surfdome. The Huntington Beach, Calif.–based Quiksilver expected to receive $16 million in an all-cash transaction.
During the summer, Tengram Capital Partners announced an undisclosed investment to fund expansion for Active Ride Shop, a retailer headquartered in Rancho Cucamonga, Calif. There are 21 active locations.
Brien Rowe advised Huf on its Altamont deal. He said that stars seemed to be aligning for investors and the action-sports and streetwear set.
“A vast amount of available private equity, combined with a strong lending environment and heavy interest in backing top streetwear brands, all contributed toward a great outcome for my client,” Rowe said. “Streetwear brands are seen as an especially attractive investment opportunity because these brands tend to transcend their action-sports roots, also having strong appeal among musicians, artists and fashion-driven customers. We’re finding that these brands are resonating broader internationally, beyond North America; they also enjoy a strong following in Europe and Asia,” he said.
Rowe is managing director, head of apparel and retail group, of Intrepid Investment Bankers LLC, based in Los Angeles. He also forecast that the good market for streetwear brands would continue well into 2015.
Deals are especially attractive for private equity, said Jeff Van Sinderen, a senior analyst with B. Riley & Co., a Los Angeles financial-services firm.
“Because the apparel business, especially action sports, has been tough, valuations are pretty low,” Van Sinderen said. “So the ‘vultures’ can swoop in and get pretty good deals.”
Investors are also looking for new, nimble brands that are poised for growth, said Shaheen Sadeghi, chief executive officer of LAB Holdings Inc., which runs specialty shopping centers The LAB, The Camp and Packing House in Orange County. He served as president of Quiksilver from 1991 to 1992 and continues to keep close tabs on the scene.
“Everybody is looking for the next wave of brands,” he said. Investors also are looking for brands that have proven themselves at retail and can appeal to a wide array of people with multiple categories of styles.
Action-sports brands always were on investors’ radar screens, but more than 20 years ago, the jury was out on how they would perform, Sadeghi said. “No one quite realized their potential to do a couple of billion [dollars] in sales,” he said.
