‘Another boom period for the industry is coming’

M&A activity then and now

As the bicycle industry works through excess inventory issues and the unknowns of a global supply chain, a key question for potential investors now is how the bike industry will evolve in the years ahead and which insights will be essential for making sound future investment decisions. To answer these questions, Houlihan Lokey Inc., and Kearney, a global management consultancy collected public data and carried our surveys with more than 30 industry executives and over 10 industry-relevant financial investors, to explore potential future trends of what might be ahead for investors. 

The report details the rise and fall of mergers and acquisitions in the bicycle industry from pre-pandemic years to now as booming market conditions brought in significant outside interest from investors. It pinpoints how during 2018 and 2019 strategic investors dominated the market with an emphasis on consolidation and strategic realignment. “Financial investors had only limited interest and involvement in the industry. At this point, the bike market was often viewed as being relatively niche and mature, characterised by modest growth prospects compared to other sectors,” the report states.

During the pandemic, M&A activity skyrocketed, with the number of transactions across the bike market more than doubling to 112 and financial investors increasing their share from 43% to almost 59%. Key transactions included GBL and Canyon, Naxicap Partners and Stromer, and Ardian and YT Industries, as well as Pon’s acquisition of Dorel Sports.

Interest in bicycle industry drops post-covid

Houlihan Lokey concludes that this explosive rise in interest and related M&A activity was mainly driven by three factors, namely favourable monetary and macroeconomic conditions, the bike market boom and new interest from financial investors. However, as the world started to recover from the effects of the pandemic, M&A activity in the bike market began to falter. A high point in the first half of 2022, however, was KKR’s acquisition of Accell Group in a deal which was originally valued at €1.56 billion. All in all 162 deals were completed over the 2022/23 period. However, the annual deal count started to decline, with 96 recorded in 2022 and 66 in 2023.

Macroeconomic softening, geopolitical tensions, the bullwhip effect and reduced investor interest where all contributing factors to this cooling in M&A’s in the bike industry, the research reveals. While all types of financial investors showed increased interest in the bike industry after the start of the pandemic, this dropped in 2023, with venture capital (VC) firms seeing a decline of 25% and private equity (PE) and family office (FO) firms experiencing a sharper drop of 50%. “This fell in line with a global downward trend in PE activity, which saw deal value, exit value, and private capital fundraising all decrease significantly,” the report states.

‘Investor interest to rebound soon’

Looking ahead 81% of the experts surveyed said that they expect more M&A’s across the bicycle industry going forward. “The good news for bike firms is that we expect financial investor interest to rebound relatively soon. For one thing, buyout funds are sitting on record reserve levels, with much of the funding having been waiting in the wings for several years. This means that those funds will be feeling the pressure to start investing again,” the report states.

 “As the bike industry recovers and professionalises, creating higher EBITDA margins and healthier cash flows, it will also become more attractive to PE firms again. Additionally, as those who invested heavily in the market during the pandemic get to the end of their investment cycles, which typically last three to six years, we will see more exits from 2026 onward as mature assets are divested, triggering a significant increase in M&A activity.”