KPS generates 8.5x return on sale of TaylorMade

The private equity firm sold the golf equipment maker for $1.7 billion after a four-year hold, marking the industry's largest deal in history.

KPS Capital Partners is poised to make 8.5x its money on TaylorMade Golf as the pandemic-friendly sport sees a surge in play, a source familiar with the matter told PE Hub.

Representing the golf industry’s largest-ever acquisition, Korea’s Centroid Investment Partners bought TaylorMade in a $1.7 billion deal – about four times its $425 million value in 2017, when KPS invested out of Fund IV, the person said.

The deal translates to 15x the company’s 2020 EBITDA, or 11.5x forecasted EBITDA for 2021, the source said.

TaylorMade, based in Carlsbad, California, manufactures golf equipment and golf balls as well as accessories like hats, gloves, bags and sports apparel.

Centroid, a Seoul-based private equity firm, was reportedly seeking to form a consortium with other Korean investors to meet the asking price of over $2 billion, but instead secured financing from Korea-based financial service provider Shinyoung Securities, according to local publication Korea Economic Daily.

Bankers told the publication that the buyer beat four other unidentified shortlisted candidates, including a global strategic buyer.

For Centroid, the deal follows its March investment in South Springs Country Club, an Icheon, South Korea, 18-hole golf course sold at almost $171 million, including debt.

It’s unclear when KPS began marketing the sports apparel and equipment brand, but rumors emerged earlier this year as golf’s popularity boomed through the pandemic.

The socially-distant game bounced back after stay-at-home orders were lifted and saw an almost 14 percent increase in activity during 2020. That is, 502 million rounds of golf were played across the US last year, up from 2019, according to National Golf Foundation.

“The industry is currently experiencing high demand, increased participation with strong long-term opportunities around the world,” said Centroid’s CEO and former Macquarie investment banker Jeong Jinhyeok in a press release.

Korea is the third-largest golf market, with the US and Japan being numbers one and two, Centroid said.

TaylorMade’s golf gear is used and sponsored by many stars like Tiger Woods and Rory McIlroy. Under KPS’ ownership, the company introduced new products, built manufacturing and distribution facilities, refocused its marketing strategy, and expanded its digital platforms, according to the press release.

The deal announced earlier this week will be completed later this year. The sell-side process was led by boutique investment bank Allen & Co. and Morgan Stanley.