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Bike industry consolidation: Dreams and nightmares

  • By John Bradley
  • Published Feb. 22, 2016
  • Updated Mar. 31, 2016 at 12:43 PM EDT
Photo: Campagnolo

The news that the conglomerate Amer Sports has purchased Enve Composites for $50 million is the latest in a spate of deals that have seen cycling brands sold to competitors (Selle San Marco to Selle Italia, Marzocchi to Fox) or to private equity or holding companies (Santa Cruz to bike-oriented Pon Holdings, POC to a Bahrain-based investment group).

This certainly isn’t new. SRAM has been fairly open about its growth-by-acquisition approach (Zipp, Avid, RockShox, Sachs). And Trek has a history of buying and then either killing or subsuming brands (Klein, LeMond, Gary Fisher). But, as in other industries, consolidation seems to be increasing in the bike world.

So who’s next? We have no idea. But we have some thoughts on deals that could make sense. They’re listed below. We have absolutely no clue if any of these companies are looking to acquire or be acquired. They are all great brands that, as far as we know, are perfectly healthy. Just fun stuff to think about.

How about you? Any bike brands you’d like to see join forces? Any that would absolutely never want to see bought or sold? Hit us on Twitter or Facebook.

Specialized and an Italian drivetrain company

Calm down! No brand puts people into reflexive attack mode like Specialized, and no brand seems as romantically connected to cycling’s past as Campagnolo. And this is, admittedly, pretty far-fetched.

That said, Campagnolo let a huge part of the cycling industry slip by when it chose not to pursue mountain biking, which helped turn Shimano into a powerhouse and arguably made SRAM — at least in its current form — possible. Those two brands now all but own the OEM market (the builds you see in bike shops).

Campagnolo’s road stuff is as good as or better than anything else out there, but the brand seems, at this point, to exist primarily as an aftermarket option. There are certainly people who buy bare frames and build up their own bikes, as well as those who chose to upgrade their existing bikes with new drivetrains. But that seems like a small slice of the retail market on which to hang an entire business, especially with Rotor and FSA entering the drivetrain scene.

For its part, Specialized has been one of the more aggressive bike companies in terms of system integration. In addition to frames, Spesh makes its own wheels, tires, saddles, bars, stems, cranksets, and dropper posts; has its own suspension technology (Brain); and has even dabbled in making its own brakes, like on the Venge.

Given the anything-goes prototypes coming out of Morgan Hill, like the fUCI, it’s hard to imagine that Specialized’s designers haven’t dreamt about what they could do if they could build their own drivetrains. Imagine, for example, a Specialized triathlon bike built around a fully integrated groupset.

But the drivetrain world is a morass of patents. Rotor went with hydraulics for its drivetrain simply because there was no sensible way around the mechanical and electronic patents already in place. So, if Specialized were to make this jump, the easiest way would be to buy existing IP. Hard to imagine them going for Rotor’s hydraulic system. Shimano and SRAM would be far too expensive and would lose their OEM business if they were bought by a single bike brand, meaning little return on investment. So, depending on what happens with FSA’s impending drivetrain, Campagnolo would seem to offer the right mix of size, IP, quality, and legacy.

Again, highly unlikely. But fun to think about.

Trek and a helmet/apparel brand

We’re going out on a limb here, but let’s say Giro. And, honestly, this could make just as much sense for Giro’s Northern California neighbor, Specialized, as for Trek. But here’s the thinking: Trek has done an admirable job of bringing its Bontrager wheels up on par with the best wheels around. In other areas, however — and especially in helmets, shoes, and apparel — Bontrager hasn’t been able to establish itself as a first-choice brand for performance-minded cyclists. Personally, I like Bontrager apparel and love the fit of their shoes. It’s all really solid stuff. But it seems to lag in terms of perception in the marketplace.

Giro dominates in helmets, is up there in shoes, and, with its New Road and Chrono lines, is making inroads in both the casual and performance apparel segments, respectively. An acquisition would instantly give Trek a leading presence helmets, shoes, and apparel. (Not that we think Giro is looking to be acquired. The company seems healthy and continues to go from strength to strength.)

There would be plenty of arguments against, however. By not being tied to a bike brand, Giro has wider latitude to sponsor pro teams. With Trek in charge, those deals would be trickier. Right now, for example, Trek-Segafredo is the only WorldTour team in Bontrager helmets. There’s also Trek’s aforementioned uneven history of owning other companies, though it has been able to maintain Bontrager as a standalone brand since acquiring it in 1995.

Still, maintaining Bontrager as a components brand and bringing in a Giro-type company to take over on protection and apparel would seem to offer a lot of potential.

Garmin and a power meter brand

Given that part of Garmin’s strength with its bike computers is that they play nicely with so many different companies’ power meters, we would have thought they’d want to avoid competing directly with those companies. But Garmin’s introduction of the Vector pedal-based power meters demonstrates that’s not the case. And, in fact, the Vector pedals are based off of technology created by MetriGear, a company Garmin acquired in 2010.

We’re not sure why there hasn’t been more consolidation among manufacturers of power meters. Right now, there’s no “power meter brand.” There are crank spider-based power meters (SRM, Quark), crank arm-based (Stages), and pedal-based (Garmin), to name a few. And there are always Kickstarter projects bouncing around for spindle- and shoe-based options. But so far only PowerTap, which has a history of hub-based power meters but now also has a pedal offering, has gone after more than one platform. No one owns or even dominates the space.

So this segment seems ripe for consolidation. Out of all the players, Garmin would seem to have the best mix of brand equity, tech bona fides, and size to start buying up the smaller players.

Garmin has shown that it gets endurance-sports technology in a way few others do. (Say what you will about its computer mounts.) Most people who have a bike computer have a Garmin. Plus, with smartphones having all but killed the market for standalone in-car GPS units, expanded sports offerings certainly would seem to be a smart move.

Shimano and Fox

This is a persistent “what if” in bike circles. When you buy a suspension mountain bike, with few exceptions, it comes built with either a SRAM or Shimano groupset and either RockShox or Fox suspension components. SRAM owns RockShox, giving that company a broader OEM presence. A Shimano-Fox merger could transform the mountain bike OEM universe without harming either brand’s aftermarket business. In fact, it’s not hard to imagine how each brand could benefit from the other’s expertise. Fox already integrated electronic lockout into Shimano’s Di2 system.

This wouldn’t be straightforward, by any means. Fox recently purchased Race Face and Easton. It would make no sense for Shimano to own those brands, nor would the company likely be keen to pay for them only to kill them. But Fox’s acquisition of Race Face and Easton was likely an attempt to solidify its OEM presence in response to the SRAM-RockShox juggernaut. That’s smart, but it would pale in comparison to a Shimano-Fox tie up.

UPDATES:
We’ll add ideas we get on social media for smart acquisitions here.

FILED UNDER: Bikes and Tech / Commentary

John Bradley

John Bradley

John Bradley is editor in chief of VeloNews. He can usually be found falling off the back of group rides in the mountains above Boulder, Colorado.

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