LMM/Search Fund Opportunities in Outdoors Gear/Outfitters?
Always been quite the outdoors person and I was thinking about possible opportunities in the gear maker, outfitter (think canoe rental), and general "outdoors" related businesses. For example, something like the canoe outfitters at Algonquin, surely they are large enough for a search fund, might even be doable for a rollup. I would assume there's a ton of succession issues there as well, given how many are family businesses.
Same thing with "cottage" gear makers, how many of the smaller makers would be good LBO candidates? Thinking about companies like Western Mountaineering, Sierra Designs, Cascade Designs. I don't see many PE firms in the space, but a lot of strategic acquisitions by the likes of Cascade and Katadyn, as well as brands like Gregory being passed around.
Is this sector already saturated? Any merit to the idea?
Based on the most helpful WSO content, it seems like you're onto something interesting here. The outdoors gear and outfitters industry is indeed filled with many family businesses, which could potentially face succession issues. This could present opportunities for a search fund or lower middle market (LMM) investments.
However, it's important to consider a few things:
The size and profitability of these businesses: While they might be large enough for a search fund, they might not be profitable enough to provide the returns expected from a private equity investment.
The potential for growth and scalability: Some of these businesses might be limited in their growth potential due to their niche market or geographical constraints.
The competitive landscape: While you mentioned that you don't see many PE firms in this space, there seems to be a lot of strategic acquisitions happening. This could indicate that the sector is already quite competitive.
The industry dynamics: The outdoors industry could be quite cyclical and heavily influenced by factors such as weather and economic conditions. This could add an extra layer of risk to the investment.
So, while there could be merit to the idea, it would require thorough due diligence and a well-thought-out investment thesis. Remember, every banana peel is a potential gold mine if you slip on it the right way!
Sources: Thinking Like an Investor, Did on cycle just start?, https://www.wallstreetoasis.com/forum/private-equity/an-ocean-of-capital-saturation-in-private-equity?customgpt=1, Any PE people considered leaving to pursue search fund/entrepreneurship paths?
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