topbanner ad

Monday 20 September 2021

Comment by Editor-in-Chief, Robin Bradley

How Did It Come to This for Kuryakyn?

The news dominating the aftermarket as this edition of AMD Magazine went to press was of Kuryakyn becoming an in-house Tucker Powersports brand rather than a standalone vendor.

The Kuryakyn origin story predates its founding by around 25 years and is one that is intimately involved with the Drag Specialties back story. Kuryakyn was the brainchild of founder Tom Rudd and was his parts and accessory industry comeback vehicle after he had sold his Drag Specialties business to a private equity investor before Fred Fox bought it out of insolvency.
It was at the height of the hype and the unsustainable growth of the late 1990s and early 2000s that the Motorsport Aftermarket Group (MAG) project started to take shape with acquisitions that included respected market leaders such as White Brothers, Progressive Suspension, Performance Machine, Mustang Seats, Vance & Hines, and, along the way, Kuryakyn.
The original vision that MAG creator Arnie Ackerman and his San Francisco based Duff Ackerman & Green (DAG) business partners had, was to cherry-pick the aftermarket and build a boutique line-up of the best brands, in what was, for the time, an enlightened and benign approach to an otherwise notoriously inconsistent and poorly defined private equity 'Build & Hold' culture back then.
Not all the projects that MAG invested in went well (White Brothers for example), and not all the founders decided to visit the bank and still stay involved - but most did - including Tom Rudd who, by then, was one of the single most experienced players in the aftermarket - in the 1960s Rudd had been one of the pioneers of opening up access to parts manufacturing factories in Asia, most notably in Taiwan.
The basic MAG concept was robust - provided the seemingly inexorable growth in the custom motorcycle parts and accessory market continued, then DAG would be able to continue to service the debt mountain it built up to buy the businesses before then flipping it.
However, therein lay the flaw, the historic weakness in the strategy, and one which would repeat and repeat again.

"many questions still to be resolved"


The growth of the late 1990s through to the mid-2020s was a paper tiger. It really was unsustainable. It was growth based on the quicksand of equity release fueling middle America's spend on its toys. Consumers in the United States (and elsewhere) were using their homes as ATMs and cashing in their apparent property profits using unsustainable and unsustainably complex loan products.
The heat in the housing market literally melted the banking system in 2007 and, all of a sudden, almost overnight, none of us were going to the bank anymore. Leveraged businesses like MAG found themselves stranded above the tide line as consumer confidence and spending evaporated.
DAG sold its position in MAG to Los Angeles based equity investor Leonard Green & Partners (LGP), but the deal they did rapidly went from viable to troubled asset status. LGP limped on as owners for some five years or so before along came the then owner of Tucker Rocky - Lacy Diversified (LDI). They thought they were buying at the bottom of the market, they were not. They thought that a tall, integrated, metal to motorcycle business model could work, it could not.
Already now double leveraged with debt (DAG, LGP), Indianapolis based LDI, who had already been owners of Tucker Rocky for some 15 years or more at that stage, mortgaged their TR assets to acquire MAG. LDI tried to pass it off as a merger, but either way the group found itself straddled with a third drink from the well of debt just as the market took another dump.
Fast forward to MAG's emergence from its bankruptcy filing in late 2018, and the private equity consortium that acquired MAG/TR (Contrarian, Monomoy and Blue Mountain) found itself in the exact same position as those who had come before them.
Sales across the board - from Kuryakyn and the other MAG 'brands' through to the newly badged Tucker Powersports and the whole of the rest of the aftermarket - did not play out as had been hoped.
That led to the great MAG 'unwind' with it all but disappearing as a corporate entity in order to save money and, above all, streamline business unit reporting straight to the investor consortium's appointed board.
Former Harley man Marc McAllister has managed to stabilize Tucker, return it to profit and, counterintuitively, return it to growth as the unexpected Pandemic Part II story has played out.
Meanwhile, the ownership trifecta has had to be aware of their responsibility to their own investors. The received wisdom was that they would listen to the right offer (for any or all of the business units) if there were interested parties.
The word is that this past summer a deal to acquire Kuryakyn collapsed at due diligence stage. With no alternate suitors on the horizon, the decision has been taken to fold the Kuryakyn assets (IP, inventory, R&D, receivables, dealer accounts etc.) into Tucker - where it will sit inside a crowded 'House of Brands' alongside the likes of Twin Power, Biker's Choice, Tucker V-Twin and many others.
The decision leaves a lot of careers and livelihoods in tatters in Wisconsin, of course, which is always a heartbreak. But it also leaves many questions still to be resolved - not least the status of Kuryakyn's agreements with other distributors in the United States and internationally.
However, from the owner's perspective, if the business was continuing to see sales decline, to haemorrhage money and fail to generate its own investment capital, then the solution is a good one - an elegant one in fact.
Marc McAllister has done a good enough job, and, above all, quickly enough, to make it a viable option - that is no small thing. As recently as 24 months ago, it would not have been feasible.
While there is work to be done to reignite the new product furnace that has always been how Kuryakyn sales were fueled, there is no doubt that, in the long run, this decision has the potential to be a very good one for Tucker's balance sheet - a very good one indeed.