Now that it has been finalized, it is time to consider the significance of the “merger” between TR/BC and MAG at a time when the v-twin aftermarket remains vulnerable to predators.No, it is not a merger -
but it is a great deal!
IT is tempting to say that the news that the deal to create a mega "merger" between industry giants Tucker Rocky/Biker's Choice and the Motorsport Aftermarket Group (MAG) has now been completed has left as many questions unanswered as it marks any kind of conclusion.
In fact it is really only now, as the dust starts to settle, that the real questions will emerge, and even now only a small number of insiders can really grasp what those questions will be, and what issues and opportunities may now arise.
At the time that the three-way agreed wording of the original press release was circulated (at the end of March 2014) the industry rumor mill went into overdrive about where this deal was headed and what it might mean for the market.
Much of that initial scuttlebutt centered on the relationship between certain MAG brands and Tucker Rocky's primary rival distributor.
However, those rumors failed to take into account that the principal underpinning to all such relationships is the money to be made in all or any business relationships, be they exclusive or otherwise, and that even strategic issues are meaningless without a convincing profit pathway.
That is where the focus needs to stay, both for those involved in the deal, and for those waiting to see what impacts it may or may not have on their own business opportunities.
Discerning the motivations of former majority MAG owner Leonard Green & Partners (LGP) in seeking a liquidation of (most of) their ownership position should, theoretically, be quite straight forward.
Founded in 2000 by Duff Ackerman Goodrich (DAG), LGP bought out DAG at the top of the market in 2006. The timing of Arnie Ackerman and his partners was exquisite. By then MAG had probably met DAG's fund ROI targets, and the first rule of getting into such a deal is knowing when to get it out. Exit strategy is key!
Having put so much of his personal passion for motorcycles into the cherry-picking of his take-over targets, Ackerman stayed with the furniture and was still group chairman and a substantial minority shareholder under LGPs ownership.
LGP’s motives will have been the same as those shared by all fund managers, to get out at the right time. Once the money has earned its keep, move on. The complication in their tenure as owners, however, has been the downturn of course.
Downward pressure on ROI and upward pressure on investment requirements as the individual business units sought to fend off the impacts of recession, while still positioning themselves for a return to growth when the tide changed, must have resulted in considerable recalibration of LGP’s targets.
Therefore one must assume that if they judged that their timing sucked when they got into MAG, there must be an element of expectation realism, if not actual cutting of losses, in their decision to bail out at the first sight of the daylight at the end of a long dark tunnel.
Regardless, as far as the outside world is concerned, LGP and Ackerman, and MAG and individual business unit management, have done a fine job of maintaining brand value and values, and of growing market shares, in the most awful of times and circumstances.
With very few exceptions (it remains such a shame about White Brothers) MAG has proven to be a benign owner, and in shaping the deal with Lacy Diversified Industries (LDI) and scheming an alliance with Tucker Rocky/Biker's Choice, LGP, Ackerman and his senior management have again proven themselves adept at coming up with a solution that appears to have the best interests of employees, investors and dealers stamped all over it.
The timing of LGP’s entry into the powersports aftermarket really marked the high watermark of outside equity's seemingly inexorable taking over of the motorcycle parts industry. Most of the deals that took place (not least the succession of owners who tried to take on Custom Chrome) after then proved ill timed.
In fact, such deals very quickly dried up as investment capital availability went south, and as the profile of the automotive industry's involvements also diminished, the motorcycle parts and accessory industry has been left largely to self-heal itself through judicious housekeeping and a restoration of focus on to core market values and business opportunities - bolt it on, service it, make it go quick, and make it user-friendly!
In LDI, MAG appears to have found a kindred spirit. An owner who 'gets it', both in terms of longevity of ownership, and in terms of the specifics of the custom parts industry.
Rather than responding negatively to the downturn, competitive pressure and TR's needs for logistics investment at a time of questionable short-term results, LDI has continued to take the long view of an ownership that has now seen it at the helm for 25 years.
While it is clearly misleading for the deal to have been press-released as a "merger" between MAG and TR/BC (no doubt they had their reasons), I chose my words carefully when previously describing it as an alliance, because it seems to me that this is a much fairer, more accurate and, above all, much more positive way of viewing it.
Technically speaking, TR's owners have bought MAG, and nobody should be under any illusions that it has been anything other than a financially motivated, strategic acquisition.
In so doing LDI have played a master-stroke in terms of the business opportunities MAG brings to TR's table, and in terms of the synergies that TR can provide for MAG.
Similarly MAG and LGP have created a future for both businesses that has knowledge, expertise, pedigree and opportunity as well as capital availability written through it like the letters in a stick of rock-candy.