Private Equity Buys Motocaddy: The Case For Cautious Optimism

UK-based electric trolley kingpin Motocaddy is being sold to an American private equity firm.

No, this doesn't mark the end of the world as we know it. Cooler heads should take the time-honored approach known as wait-and-see.

Motocaddy is being sold to the Los Angelas-based PE firm Corbel Capital Partners for an undisclosed amount. Motocaddy says the company's existing management team will stay in place while CEO John Helas and CFO Richard Inglis will join the company's new board of directors.

"We're extremely proud of what Motocaddy has achieved over recent years," said Helas in the press release. "Corbel Capital Partners represents an exciting next step for the business. We've established a strong international platform with significant opportunities still ahead of us, particularly in North America."

Corbel principal Christian Hostetter adds that "Motocaddy is the clear category leader with a loyal customer base, a strong pipeline of new products and significant room to grow in North America. We are delighted to partner with John and the team and look forward to supporting the business through its next phase of growth."

Why is Motocaddy being sold? And why to PE?

Motocaddy has been at or near the top in every electric trolley test MyGolfSpy has ever done. Everything else aside, we can say Corbel Capital is buying a company with a proven track record.

So why is it being sold?

To understand that, it's important to know who is doing the selling. Since 2019, Motocaddy has been owned by the London-based investment firm ETHOS Partners. ETHOS is a small private investment office, not quite a big enough to be categorized as a typical PE firm. It backed Motocaddy with money from its partners and from select individual clients.

When ETHOS acquired the majority stake in Motocaddy in 2019, its timing couldn't have been better. That was just before COVID and an industry-wide walking golf boom. Motocaddy has reportedly doubled in size under ETHOS' stewardship and opened a new North American distribution and service center in Southern California.

Conversely, ETHOS is selling at the right time. Motocaddy's continued growth requires additional investment in product and production which likely requires deeper-pocketed ownership. Corbel Capital, while not considered a large PE firm, does manage over a billion dollars in assets, primarily in business services and technology. Motocaddy is not only Corbel's first foray into golf; it's also the first time it has ventured into a consumer-facing product.

Is PE a "death knell?" Hardly

Every time a PE firm buys into golf, we hear tales of disaster, woe and worse. While the worst can happen, it often doesn't.

The problem is that we remember the disasters, because disasters get the headlines. The Toys 'R Us PE buyout disaster is legendary but it's hardly the rule. Closer to home, the biggest PE disaster was KKR's buyout of Spalding in 1996. The $900-million leveraged buyout was doomed from the start because KKR borrowed heavily to make the deal happen. Then it saddled Spalding with repaying that debt. The interest tab alone was more than $50 million a year. By the time Spalding went bankrupt in 2003, it owed more on the debt than it was worth on the open market.

PE also has a reputation for quick turnarounds, often within three to seven years. That can lead to short-sighted cost-cutting on things that build a brand over time such as R&D and long-tenured experienced employees. Ultimately, much depends on how much debt goes into the sale and whether the buyer is trying to make a quick buck or whether it wants to grow the business long-term, make it more valuable and eventually sell at an even greater profit.

Plenty of examples

Forget disasters. Here are a few PE buyouts that have worked.

Remember when FILA Korea and a Mirae Asset private equity consortium bought Acushnet from Fortune Brands in 2011? That seems to have worked out pretty well.

Then there's KPS Capital's purchase of TaylorMade from adidas in 2017 for $425 million. TaylorMade had been on a downward trend for years but KPS turned it around, righted the ship and sold it to Centroid in 2021 for $1.7 billion. TaylorMade's rumored to be on the block again for $3.3 billion to $3.7 billion.

That one worked out pretty well, too.

It's still too early to tell how the L.A.B. putter PE acquisition will turn out. New ownership did shift stock putter manufacturing to Mexico. The Oregon facility is cranking out custom orders at a dizzying pace.

Perhaps the best example is Motocaddy itself. ETHOS used modest debt and kept management in place after the 2019 purchase. Reports indicate sales have roughly doubled during the ETHOS years and it sold Motocaddy to another group with plans to continue that growth.

The clearest indication of Corbel Capital's intent is that key Motocaddy managers are staying on. Helas was already with Motocaddy when ETHOS bought the company in 2019 and he's staying on under the new ownership.

The smart money says Motocaddy's new ownership will be doubling down on the company's recent growth. While we can only speculate, it's likely Corbel Capital will provide new investment in R&D, production and distribution, particularly in the U.S.

After all, in business you can do more things with money than you can do without it.