Spyder Active Sports - 2004

Abstract

Spyder is a manufacturer of high-performance ski apparel, owned and managed by its founder David Jacobs and by CHB Capital Partners, a private equity firm to which Jacobs sold a minority interest in the company in 1997. Jacobs's two sons also work at the company. By 2004, CHB is seeking a liquidity event, and Jacobs is considering alternative types of equity transactions that would allow him to harvest wealth, including a trade sale to another apparel company and the sale of a large block of stock to another private equity firm.

The case illustrates the opportunities and challenges that private equity investors represent for family-owned and managed companies. Students need to identify the different exit options that are feasible for Spyder in 2004, and analyze the benefits and costs of each alternative for the various interested parties - Jacobs, CHB, and Jacobs's sons, among others. The decision is ultimately for Jacobs to make, and requires a detailed valuation of the company. The data in the case enable a discounted cash flow valuation as well as a multiples approach (comparable companies and/or comparable transactions). Depending on the valuation method used and on the exit alternative chosen, different discounts or premiums may apply - synergies and control premiums (or discounts for lack thereof), a discount for lack of marketability, and a discount for the small size of the company.

Keywords: Family business, private equity, valuation, growth capital

JEL Classification: G32, G24, G3