Global Edition

 

Equipment sector set for accelerated acquisition activity

8.58am 16th October 2008 - Management Topics

A new report suggests that as the effects of the turmoil in the wider economy reaches the UK golf equipment market, a series of takeovers and sell offs will sweep the market.

The report, by leading industry analysts Plimsoll Publishing, has found that a combination of needs is forcing smaller companies to consider selling to their larger rivals and larger players are looking to buy their smaller rivals to diversify and develop their businesses.

David Pattison, senior analyst at Plimsoll, has a clear view on this. “It has a great deal to do with necessity. Many of the larger players in the market, despite the downturn, are desperate to find new ways to develop their business, but with the current climate, costs are being cut and business development is being slashed.

“So they need options to help them protect their futures and tap into exiting revenue and profit streams. Financing a series of small acquisitions at key niche players in the market will give them two clear benefits:
• A quick route to increasing sales for relevantly low cost
• A foothold in the emerging sectors of the market

“The facts are very clear:
• For the last few years, the larger companies have been surviving on wafer thin margins, most only making 1% or less
• 10 of the UK’s top 139 players are actually losing money at the moment. This is evidence that their strategy of chasing sales and volume compromises profits.

“Meanwhile at the other end of the market, an emerging group of companies are smaller, high focused players. These fast-growing companies have been able to carve out niche markets for themselves, some with premium profit margins. The best examples of these companies are:
• Reporting sales increases of well over 8.4% per year
• Reporting margins of 9.6%

“However, despite the excellent returns there now seems to be an eagerness to sell from many of owners. Several factors are at play here: a combination of their businesses now reaching a critical point in their development, twinned with the tightening of credit and a reluctance of the money markets to finance the next phase of development. In today’s market, selling their business makes sense for two clear reasons:
• Brings the chance of stability and security to protect the business
• Accelerates the development of the company due to extra resources”

David Pattison comments on these smaller companies seeking buyers, “It would be a pity of some of these exceptional businesses went to the wall, or do not get the maximum chance to prosper just through lack of funding.”

The Plimsoll Analysis- Golf Equipment clearly names and identifies the companies most exposed to the downturn, those in pole position to prosper and those where the combination of poor performance and slowing economy has exposed them as a cheap acquisition.

This special edition of the Plimsoll Analysis analyses all the names, details and financial performance of the UK’s 139 leading Golf Equipment firms. It also includes a future snapshot on each company demonstrating how each might survive this period of consolidation. It rates each company on their attractiveness as an acquisition and highlights the most attractive companies to buy in the golf equipment sector.

The report is available to readers of GBN at the discounted price of £350 by calling Clair on 01642 626422 or e-mailing c.sherwood@plimsoll.co.uk

Plimsoll www.plimsoll.co.uk

       

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