Gearing Up for Every Season
(Business 2.0) – Athletic-equipment maker K2 wants to be all sports to all athletes—from skiing to baseball to fly-fishing. Sound ambitious? The same thought probably occurred to some of the smaller sporting goods manufacturers that were gobbled up by this relentless acquisition machine during the past year.
In late 2002, K2 brought in Dick Heckmann to serve as CEO, and the Carlsbad, Calif., firm has been on a buying spree ever since. After snapping up 17 companies—10 in 2004 alone—K2's sports equipment empire now spans leading brands such as Rawlings (baseball), Worth (softball), Brass Eagle (paintball), Shakespeare (fishing), Marmot (outdoor apparel), Volkl (skiing), and Atlas (snowshoes).
Along the way, revenue has grown to an estimated $1.2 billion in 2004, up 65 percent from 2003, while profits have skyrocketed 152 percent to an estimated $40 million.
More important for the long term, K2 is now positioned to serve a retail landscape dominated by Wal-Mart and other big-box retailers like the Sports Authority and Dick's Sporting Goods. "How the hell do you supply a 3,000-store infrastructure with a little company? You can't do it," says Heckmann, who in the 1990s made 260 acquisitions as CEO of U.S. Filter, a water-treatment company, before joining K2.
K2 now commands about 5 percent of the highly fragmented $17.7 billion athletic equipment market, with a stable of brands that are major players in a dozen sports and all four seasons. Meanwhile, its growth strategy has been carefully managed. The company follows a strict set of rules in making acquisitions: It buys only leading brands in a category, it seeks products that will easily integrate with its low-cost manufacturing and distribution infrastructure, and it refuses to overpay. "K2 has maintained its discipline when acquiring companies," says BB&T Capital Markets analyst Kathryn Thompson.
Looking ahead to potential targets, K2 lists high-end running-shoe brands (possibly Saucony or Brooks, according to analysts) and niche companies with specialty products that would complement the company's product roster. Heckmann recognizes that he can't buy what's not for sale. But, he says, if it has a price tag and anything to do with sports, K2 is interested. — BRIDGET FINN