Episode Summary
Executive Summary: David Shapiro of KPS Capital recounts TaylorMade’s distressed spin-off from Adidas, KPS’s contrarian thesis on manufacturing and golf, the operational turnaround they executed across supply chain, pricing, marketing, and e-commerce, and why they sold in 2021 after restoring growth and profitability.
Main Topics: KPS Capital’s manufacturing-focused investing strategy (Priority: 5/5): Shapiro explains KPS’s origins in restructuring, its focus on companies that make products, and its preference for corporate carve-outs, turnaround situations, and controllable costs in out-of-favor sectors. Why TaylorMade was attractive despite a weak golf market (Priority: 5/5): TaylorMade was a premium brand trapped inside Adidas, a soft-goods company, in an industry widely viewed as declining. KPS saw a mismatch between owner and asset and a chance to improve a business others avoided. Deal process and delayed acquisition from Adidas (Priority: 4/5): The sale process stretched from late 2015 to 2017, was broad and messy, and involved strategic uncertainty about what Adidas was selling. A new Adidas CEO ultimately prioritized closing with a buyer who could execute. Operational turnaround levers (Priority: 5/5): KPS and management improved the business by integrating supply chain planning into product development, tightening inventory and working capital, reducing product-cycle mistakes, and building better standalone finance systems. Brand, athlete sponsorships, and marketing strategy (Priority: 4/5): TaylorMade shifted from broad, inefficient spend to more targeted athlete and social-media-driven marketing, emphasizing influential players and content distribution rather than raw driver count. Growth in balls, geography, e-commerce, and pricing (Priority: 4/5): KPS pushed underpenetrated categories like golf balls and putters, expanded internationally, grew direct-to-consumer e-commerce, and raised pricing on flagship drivers. Exit timing and outcome (Priority: 4/5): KPS sold in 2021 after three strong years and a pandemic-boosted market, believing the business had peaked in value and should be monetized rather than held too long.
Key Arguments: KPS’s edge is investing where others won’t: troubled manufacturing businesses in sectors viewed as unattractive, because inefficiencies create opportunity. TaylorMade was under Adidas, but making golf equipment was not Adidas’s core competence; separating it could unlock value. Golf was not dying; it was being poorly managed. A strong brand plus better execution could outperform a weak industry narrative. TaylorMade’s biggest problem was self-inflicted: too-short product cycles created excess inventory, discounting, and margin compression. A better supply chain and information flow would allow more rational product decisions and lower working-capital intensity. Athlete endorsements matter, but not all sponsorship spend is equal; social reach and influence are more valuable than simply paying for driver count. The turnaround came from fundamentals first: operations, pricing, inventory, finance, and marketing discipline, not just market growth. Selling in 2021 was prudent because golf brands cycle, the business had already had multiple strong years, and KPS is disciplined about returning capital rather than falling in love with assets.
Data Points: KPS assets under management: in excess of $14 billion - Firm size described by David Shapiro KPS history: three-decade-old private equity firm - Background of KPS Capital Partners KPS deal mix: about two-thirds corporate carve-outs - Shapiro describes recent deal sourcing TaylorMade sales at peak: a little over $1 billion - Prior to the downturn, the company exceeded this revenue level TaylorMade EBITDA at peak: a little over $100 million - Earlier financial performance before decline TaylorMade sales trough: below $600 million - Worst year referenced around 2015 TaylorMade EBITDA trough: loss pushing $200 million - Worst-year operating performance before turnaround TaylorMade 2017 run-rate EBITDA: more like $50 million negative - Business improved under David Abelis before KPS closed TaylorMade close-date EBITDA: barely $10 to $15 million negative - At KPS closing in October 2017 Indicative purchase price: neighborhood of $400 million - KPS’s valuation framework for the deal KPS equity investment: $175 million cash - Equity contributed in the transaction Seller note: about $100 million - Adidas provided seller financing Marketing spend at acquisition: 20% of revenue - TaylorMade was overspending relative to revenue at purchase Marketing spend at sale: 11% of revenue - Marketing efficiency improved substantially by exit Top driver price movement: from under $500 to well over $600 - Pricing discipline and brand strength allowed premiumization Product e-commerce share: from about 3% of sales to pushing 15% - Direct-to-consumer grew materially during ownership Cash conversion cycle improvement: up 25 days - Working capital and finance improvements over two years Transition services period: 18 months - Post-close separation from Adidas required extended shared-services support Process scope: well over 100 buyers contacted - Adidas ran a broad, global sale process Athlete contracts under management: about 400 - TaylorMade had a very large sponsorship roster before rationalization TaylorMade ball share: about 3% - Ball business was underdeveloped at acquisition Titleist share in premium ball segment: 55% - Used as benchmark for market dominance
Pivotal Quotes: "You can't be $50 million too smart here." — Andy Tausig: Banker urging KPS not to over-negotiate valuation during the sale process "Know what you know and give space for the areas that you don't." — David Shapiro: Shapiro’s main lesson learned about partnering with management on roles and expertise "Wherever there's a lack of capital, there's probably going to be an opportunity." — David Shapiro: Explaining KPS’s original thesis for investing in distressed manufacturing
Implications: The episode shows how disciplined operational fixes, not financial engineering alone, can transform a neglected brand. It also suggests golf remains investable when execution, pricing, and channel strategy improve, even in a challenged category.
About Private Equity Deals
Allocator and asset management expert, Ted Seides, conducts in-depth interviews with interviews with top institutional money managers across private markets. Guests include principals and senior leaders from private equity, private credit, real assets, and other alternatives. We dive deep into individual deals to learn about deal dynamics, companies, and ownership that make private equity a force in institutional portfolios and the global economy. Learn more and join our community at capitalallocators.com.