IS IT TRUE? Cycle Lab buying CWCycles? (Poll Added)

[Sharkie 2]

They were after Hotspot in Atterbury as well....did not give him what he was looking for and now they are sitting with a ghost town in Lynnwood Avenue

[Patchelicious]

Yes but then it should be phrased, family has been asked to stay on. Not "keeps their jobs"

 

Congrats to the okes for creating something that OM wanted to buy

Probably not "asked".

 

Usually when a business is acquired, it will not be a once off lump sum.

This is because they want the existing management team to stay on doing what it is they were doing and keep the growth that attracted the purchaser in the first place.

 

Usually there is a portion paid out, and subsquent portions based on profit warrants.

Basically to get your full purchase price you still need to show growing profits for the agreed period. Usually over 3 tranches based on your agree PAT/PE or EBITA, depending on valuation method.

 

If it is OM who bought them, it would have been as an investement for their investement portfolio, it would not be becasue they want to sell cranks

 

OM must keep growing at a certain rate to maintain/increase their PE ratio, so that they can give their investors a return.

 

This means their investements, need to keep growing.

 

Long and the short of it, unless they are super confident that they can manage CWC better than Snr and Jnr, they would have kept them on with profit warrants.

 

Just ask Andrew why he is still sitting at CL each weekend instead of on the beach

[gummibear]

Probably not "asked".

 

Usually when a business is acquired, it will not be a once off lump sum.

This is because they want the existing management team to stay on doing what it is they were doing and keep the growth that attracted the purchaser in the first place.

 

Usually there is a portion paid out, and subsquent portions based on profit warrants.

Basically to get your full purchase price you still need to show growing profits for the agreed period. Usually over 3 tranches based on your agree PAT/PE or EBITA, depending on valuation method.

 

Never knew that.How long could it take to get full payment then?

[Patchelicious]

Never knew that.How long could it take to get full payment then?

Depends on the motivation of the deal.

 

If the business is being aquired for strategic reasons and they dont want the owners/execs staying on, it will be a single transactions.

 

The deals I have been close too, have all been driven by synergy and mutual growth. These were usually over a 2 - 3 year period.

[Meezo]

so is this true?

[V12man]

 

Just ask Andrew why he is still sitting at CL each weekend instead of on the beach

He will be on the beach soon....

[Shebeen]

Hmm,

 

for all their bad press and so called issues CL have, they seem to stay in business and be growing at a speed.

 

I was in there the other day and the sheer variety of what they have on the shelves is huge.

 

It's better than some major stores i have been to in the USA.

 

Sure its not niche but its pretty damn impressive.....

 

I have always been treated well by them.

 

Strategically it would seem like a great idea to pair the two up and leverage the synergies - it would certainly take out a lot of competition...

 

 

ja, but...down here in CT there is zippo cyclelab these days. not sure if the tokai branch still counts as it is tiny and still looks empty.

 

It would make a bit of sense in terms of footprint - CWC are in the cape but that's it.

 

but I will wait for an official announcement before I believe it.

[Patchelicious]

He will be on the beach soon....

Yip, tongue in cheek that was

[scuzzy]

Cyclelab has always struggled in Cape Town

 

I think with the culture of CWC, they can maybe make it here.

 

Doubt it is for an online portal or grey imports.  With the king of money they will be spending on buying CWC, they could have done it themselves.

 

Not as if the online shop is that cutting edge.

[V12man]

Yip, tongue in cheek that was

Much truth in jest.... warmer climes await....

[Pure Savage]

Cyclelab has always struggled in Cape Town

 

I think with the culture of CWC, they can maybe make it here.

 

Doubt it is for an online portal or grey imports.  With the king of money they will be spending on buying CWC, they could have done it themselves.

 

Not as if the online shop is that cutting edge.

 

CWC is probably SA's biggest online cycle store....

[gummibear]

Depends on the motivation of the deal.

 

If the business is being aquired for strategic reasons and they dont want the owners/execs staying on, it will be a single transactions.

 

The deals I have been close too, have all been driven by synergy and mutual growth. These were usually over a 2 - 3 year period.

Yoh.....could take long then.

[gummibear]

He will be on the beach soon....

Going to run the new store?

[Patchelicious]

Ultimately there is one thing the Hub can be certain of, and that is that CWC has always acknowledged and understood value of the Hubbers.

 

So if there is truth in this, I am sure they will come and announce it as soon as they are in a position to do so.

 

If there isn't, well then GrootLem strikes again

[khm4252]

Probably not "asked".

 

Usually when a business is acquired, it will not be a once off lump sum.

This is because they want the existing management team to stay on doing what it is they were doing and keep the growth that attracted the purchaser in the first place.

 

Usually there is a portion paid out, and subsquent portions based on profit warrants.

Basically to get your full purchase price you still need to show growing profits for the agreed period. Usually over 3 tranches based on your agree PAT/PE or EBITA, depending on valuation method.

 

If it is OM who bought them, it would have been as investement for their investement portfolio, it would not be becasue they want to sell cranks

 

OM must keep grwoing at a certain rate to maintain/increase their PE ratio, so that they can give their investors a return.

 

This means their investements, need to keep growing.

 

Long and the short of it, unless they are super confident that they can manage CWC better than Snr and Jnr, they would have kept them on with profit warrants.

 

Just ask Andrew why he is still sitting at CL each weekend instead of on the beach

 

What you are talking about is called an earn out and we are all speculating so we have to make assumptions.  I can only see an earn out operating under 2 conditions:

 

1.  The business operates as a stand alone i.e. not integrated into Morecycles and no name change to Cycle Lab etc.

 

2.  Managment in autonomous to run the business as they want so as to get the earnings that justufy the multiples paid for the business. There will be 10% buffer or some figure used before the deal value is racheted up or down. 

 

I understand why Old Mutual would want to do the deal (bulk up their asset, Moregroup)  but I think the cultural fit will make the deal hard to work as outlined by others.  The is also tramendous brand value in the Chris Willemse name, I can not imagine them paying so much goodwill (intangible asset i.e. brand name) and then changing the name to Cycle Lab. 

 

I wonder if Chris bought into the Cycle Lab culture and is staying on to be part of the larger group and will have an equity stake Morecycles.  Morcycle management have a share of the business and he could be buying into that.

 

I do love CWC customer focus and hands on approach.  In stark contrast to almost all other online bike stores.  Cycle Lab do have a great brand as well but I would has a guess that the recreational cyclist associates more with Cycle Lab and the more hardcore cyclists associate with CWC. 

[Spinnekop]

What I loved about CWC.

1. Good website.  Sales driven
2. Good service
3. Perfect shipping.

The past 3 or 4 purchases I wanted to do I picked up that they have become pricey and my LBS gave me better prices even though I did not ask for it.

But that is besides the point.

 

I just hope that the current SUPER crap website of CL does not spill over to CWC.  That would be a disaster for them.