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Guest Opinion: What's next for the bike industry? Look to the past

Published February 25, 2016
A guest opinion article by Steve Maxwell and Felix Magowan.

The recent news that Mavic parent Amer Sports is buying Enve Composites, and that the two huge British bike e-retailers Wiggle and Chain Reaction Cycles have agreed to merge (and, today, that Vista has bought a chunk of BRG Sports- Ed.)' prompts an obvious and perhaps inevitable question: Is this an indicator of a new trend in the bike business? What’s next? A quick look back at previous periods of consolidation may yield some answers.  

With few exceptions, the worldwide bike industry has been in a flat, no-growth environment the last few years. And in industries or times when business is flat, you tend to see a wave of consolidation sweep through the industry. Retailer A is acquired by Retailer B. Retailer C suffers in the more highly competitive marketplace, and goes out of business. Capacity is reduced, or “rationalized,” as the saying goes. 

Consolidation trends are driven by simple economics: those with capital are seeking the best return on their dollar, and hence that capital tends to get invested where it’s likely to grow or multiply the fastest - typically in companies exhibiting stronger growth and profitability.  When there is not much external or general industry growth, one of the few ways for companies to grow is by acquiring competitors. Top-line revenues increase, while duplicated expenses like overhead staff, accounting, computer systems, rent, marketing, and so on can be “consolidated.” Sales go up and percentage costs go down. That’s the theory, at least.

It wasn’t until the 1990’s that the bicycle industry really attracted sophisticated, professional investors – the kind of capital that typically invests in boom and bust cycles in consumer businesses. Previously, during the road bike “bust” after 1973 (when over 15 million bikes were sold in the U.S. – still an all-time record!) a wave of consolidation did occur as the market contracted by more than 50% in just three years, but it involved primarily a handful of foreign manufacturers, a few savvy U.S. strategic investors such as the Cohens at West Coast Cycle, and a whole lot of smaller and struggling “mom and pops.” It didn’t feature much outside capital as Wall Street hadn’t yet discovered the bike industry. 

Fast forward 20 years. The mountain bike boom of the early 1990’s attracted a lot of investment dollars flowing into a rapid expansion of off-road-themed retailers and suppliers – remember all those outfits with CNC machines turning out brakes and hubs?  – to service what was essentially a new market. When the boom peaked in about 1996 and sales growth in that new sector began to flatten, many of these new companies merged with their competitors, or went out of business. 

Since then, consolidation in the bike industry has been largely driven by four actors: (1) financial investors, such as the private equity firm Questor that owned Schwinn, enabling it to buy GT Bicycles in 1998; (2) “strategic” buyers such as Bell Sports (often backed by Wall Street investors) that have vacuumed up well-known brands like Giro, Blackburn, Mongoose, and Vistalite; (3) a rather amorphous “other” category that might best be called “enthusiasts” – wealthy, but non-professional investors who are cyclists and who want to invest in the sport they love (similar to the wealthy patrons who back many pro cycling teams). This remains a surprisingly large and vibrant category, as witnessed by much of the merger and acquisition activity reported at And finally, (4) are retailers and firms who “consolidate” themselves out of business, because they can’t find a buyer, or can’t be bothered to carry on in tough times. 

Historically, the more sophisticated financial buyers tend to invest in the bike industry toward the end of a growth cycle – and in order to continue their returns they tend to act as vehicles which consolidate competitors. In the Wiggle-Chain Reaction combination, Wiggle owner – London-based private equity firm Bridgepoint – invested in 2011, and to keep their investment growing, they probably felt they needed to merge with their largest competitor. And as a larger publicly-held company Amer Sports knows the stock market won’t accept flat growth like they have had in the cycling sector with Mavic; the company apparently sees the combination with Enve as a way to reverse that trend. What’s significant is that both deals are being driven by savvy financial players – a trend surely to continue. 

So, in terms of what’s next – probably more consolidation, and more deals like this between both large and small companies, as the industry repositions for the future. But while the high-end road bike renaissance may have passed, don’t worry. As in virtually all other consumer business, another cycle of growth and diversification will come eventually. Perhaps it will come in the form of commuter or e-bikes, or in a resurgent off-road category. But change and innovation will happen, one way or the other. There will always be new technologies, and customers will always demand new products. And in each cycle new and exciting companies will be born. For evidence of that, we only need to point to some of the outstanding companies that were founded during that grim round of consolidation in the mid-1970s – companies like retailer Bicycle Gallery and manufacturers Specialized and Trek. 

Steve Maxwell is co-editor of the cycling website, and managing director of TechKNOWLEDGEy Strategic Group, a Boulder, Colorado-based firm specializing in merger and acquisition advisory services. Felix Magowan is partner at Pocket Ventures, a private equity firm, former owner of VeloNews, and a founding investor & board member at Pearl Izumi. Maxwell and Magowan have advised dozens of firms on strategy and transactional issues, and can respectively be reached in Boulder at (303) 442-4800 or (303) 443-4360, or via e-mail at or


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