Capstone Headwaters

RECREATIONAL PRODUCTS
Q1 2018

TABLE OF CONTENTS MERGER & ACQUISITION OVERVIEW

 M&A Overview Attractive economic factors such as the low unemployment rate (4.1%) and a
 Segment Highlights high consumer confidence level (125.9), have created favorable conditions for
the Recreational Products industry. Additionally, according to the US Bureau of
 Notable Transactions
Economic Analysis, per capita disposable income rose to $39,277 in October—
 Select Transactions the second-highest level in a decade. As more Americans gain earning power
 Public Company Data and economic stability, discretionary spending on leisure activities and sports is
likely to increase and drive industry demand.
 Firm Track Record
Another positive industry tailwind is the growing preference towards health-
conscious and environmentally friendly activities. Nearly 50.0% of Americans
(144.4 million people) participated in at least one outdoor activity in 2016—two
million more than in 2015, according to the Outdoor Industry Association (OIA).
According to the American Recreation Coalition, segments which have recently
CONTRIBUTORS experienced significant growth include Archery (with a 20.0% increase in activity
between 2012-2015), Recreational Vehicles (with an expected 11.4% increase in
Sophea Chau shipments between 2016-2017), Boating (with an expected 6.0% increase in boat
Director sales between 2016-2017) and Camping (with household camping participation
617-619-3307 up 58% from 2014).
schau@capstoneheadwaters.com
M&A Activity: Recreational Products
Jacob Voorhees 120
Managing Director 98
Number of Transactions

617-619-3323 100
88 89
jvoorhees@capstoneheadwaters.com
80 67
63
Lisa Tolliver 60 47
Director 39
312-674-4532 40 31
ltolliver@capstoneheadwaters.com
20

0
2010 2011 2012 2013 2014 2015 2016 2017
Source: Capital IQ and Capstone Headwaters Research

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www.capstoneheadwaters.com January 2018
 Recreational Products | Q1 2018

Throughout 2017, 89 deals were announced or closed in the Recreational Products industry—positioning deal activity to
meet, or more likely exceed, that of 2016. Public company EBITDA multiples have also remained strong with a median of
10.7x, well above the 9.1x median in the overall middle market. Strategic buyers continue to drive the majority of deal
activity and have accounted for 61.8% of transactions in 2017. At the same time, private equity buyers (equipped with more
than $545.5 billion in dry powder) have shown an increased interest in the industry, and drove 38.2% of deals as compared to
29.3% in all of 2016.

SEGMENT HIGHLIGHT: BIKES

Cycling is gaining prominence as more Americans utilize bikes for both transportation and
recreation. According to the US Department of Transportation, 13.0% of travelers in the US
take at least one bicycle trip per day. State governments have supported the industry by
expanding roadways to include bike-only lanes and by installing public bike-sharing systems
in major cities. According to IBISWorld, the Bicycle Dealership and Repair industry increased
at an annualized rate of 2.5% over the past decade to 2017. Companies that target high-
income consumers with products such as carbon-fiber race bikes are expected to be well-
positioned for continued growth in the current market.

The Bicycle industry is highly fragmented and companies have used acquisitions as a means to gain dominance in the space.
Merger and acquisition (M&A) activity in this segment accounted for 10.1% of activity in 2017. Acquired bicycle companies
included Middleton Cycle Shop, Bike24 (highlighted on the following page), City Bicycle Works, Collins Cycle Shop, Bike
World, Vanhawks, Beeline Bikes and Revolution Cycles for a total of nine identified transactions.

SEGMENT HIGHLIGHT: LEISURE

Driven by continued economic growth and favorable industry fundamentals, the Leisure
Products segment has experienced steady growth and is poised to benefit from rising
disposable income. The market for RVs and camping products, in particular, is expected to
grow in conjunction with rising levels of disposable income. According to IBISWorld, the RV
and Camping Segment is expected to grow 2.4% annually to 2022, while disposable income
is projected to grow 2.7% during the same period.

With 23 deals announced or closed in 2017, segment activity remains robust and has
accounted for 26.4% of all deals in the Recreational Products industry. While volume within
the segment has remined fairly inh line with that of 2016, buyer breakdown has changed drastically, as financial buyers laden
with dry power have increased their share of deals to 47.8% in 2017 compared to just 20.7% in 2016. As a result of the
increased competition to win deals, average disclosed transaction values have reached an impressive $113.5 million.

SEGMENT HIGHLIGHT: WINTER SPORTS

Participation in Winter Sports has increased 1.7% over the past three years, according to
Snowsports Industries America (SIA) with downhill skiing being the most active segment
(approximately 11.9 million participants last season). Average snowfall at ski resorts
increased by 40.0% in the 2016-2017 season as compared to 2015-2016, contributing to the
overall rise in participation, according to the American Recreation Coalition.

In October, leading global mountain resort operator Vail Resorts agreed to acquire three
outdoor retail stores in the historic ski town of Breckenridge, Colorado from Breckenridge
Ski Enterprise. Vail Resorts has made 11 acquisitions over the past five years for a total
value of $1.6 billion.

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 Recreational Products | Q1 2018

NOTABLE TRANSACTIONS

Several notable transactions were announced or completed in the Recreational Products industry during 2017. Select
transactions are outlined below, followed by a more comprehensive list on the following table.

Camping World Holdings acquires Uncle Dan’s Outfitters

(October 2017)

Camping World Holdings, Inc. (CWH), the nation’s leading outdoor and camping retailer, acquired
Uncle Dan’s Outfitters (Uncle Dan’s), a Chicago-based specialty retailer of outdoor gear, apparel and
camping supplies, for an implied enterprise value of $8.2 million. In the press release, Chairman of
CWH Marcus Lemonis noted, “Uncle Dan's Outfitters strengthens Camping World Holding's efforts
to build a seamless approach to the outdoor lifestyle market and further positions the company to
expand the reach and product offerings of our e-commerce business.”
Acquires
Throughout 2017, CWH has been one of the most active buyers in the space, having acquired a total of
three companies. Prior to acquiring Uncle Dan’s, CWH acquired Active Sports, Inc., an online retailer of
outdoor equipment, for an implied enterprise value of $70.5 million and Grander Mountain Company, a
retailer of a variety of outdoor products and accessories, for an implied enterprise value of $34.1 million.
The heightened appetite for acquisitions is indicative of CWH’s strategy to gain additional scale and
penetrate new markets by diversifying offerings and establishing a multichannel sales approach.

Wiggle acquires Bike24

(October 2017)

UK-based Wiggle, an online cycling equipment retailer, has agreed to acquire German competitor
Bike24. Terms of the deal were not disclosed. Founded in 2002, Bike24 sells bicycles, frames,
components, related apparel and sports nutrition products. The acquisition is in line with Wiggle’s
strategy to expand its presence in mainland Europe, and complements the 2016 merger with
Northern Ireland-based Chain Reaction Cycles (CRC). Much like CRC, Bike24 will continue to operate
Acquires
as a separate brand. In a statement, Wiggle CEO Will Kernan commented, “The Bike24 brand, team
and customer proposition will remain and will be further supported by the WiggleCRC business.
Customers across the group will benefit from a broader offering of leading brands, great service and
compelling value.”

Court Square Capital acquires PlayCore

(October 2017)

New York-based private equity firm, Court Square Capital Partners (Court Square), acquired
PlayCore, a manufacturer of educational play and recreational products, from fellow private equity
firm, Sentinel Capital Partners (Sentinel). Terms of the deal were not disclosed. Founded in 1979 and
headquartered in Chattanooga, Tennessee, PlayCore is the nation’s largest manufacturer of
playground equipment. Since being acquired by Sentinel in 2014, PlayCore has acquired 14
Acquires companies, expanding its portfolio to 27 brands with more than 8,000 customers.

On the acquisition and the future of the company, PlayCore President and CEO Roger Posacki noted,
"To be quite candid, nothing's changing. We're going to keep investing in core growth and
acquisition growth going forward. There's a lot of opportunity for future growth."

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 Recreational Products | Q1 2018

SELECT TRANSACTIONS
Enterprise EV / LTM
Date Target Acquirer Target Business Description Value (mm) Revenue EBITDA
Aristocrat
11/29/17 Big Fish Games Distributes casual games for customers worldwide. $990.0 2.2x 11.9x
Technologies
Epic Brand Produces and distributes apparel for sports, running,
11/15/17 Sport Science - - -
Management walking and various mountain activities.
Middleton Cycle
11/14/17 Wheel & Sprocket Owns and operates a bicycle shop. - - -
Shop
War Eagle Custom PRADCO
10/31/17 Manufactures fishing equipment. - - -
Lures Outdoor Brands
Sells bicycles, frames, sports nutrition products and related
10/23/17 Bike24 Wiggle - - -
apparel products.
Owns and operates a bike shop that sells bikes, clothing
10/18/17 City Bicycle Trek Bicycle - - -
and accessories.
Owns and operates outdoor sports clothing and
10/16/17 Breckenridge Ski Vail Resorts Retail $8.2 - -
equipment stores.
Camping World
10/12/17 Uncle Dan’s Operates outdoor apparel stores. - - -
Holdings
Clearview Designs waterproof environmental and sports performance
10/10/17 Nielsen-Kellerman - - -
Capital instruments.
Court Square Manufactures and sells educational play and recreation
10/02/17 PlayCore - - -
Capital products.
The Running
10/02/17 Rogue Running Offers marathon and trail running programs. - - -
Specialty Group
Manufactures and retails customized tailgating and
10/01/17 Victory Tailgate KLH Capital - - -
backyard games and accessories.
Collins Hutch’s Bicycles
09/13/17 Operates a bicycle store. - - -
Cycle Shop Store
Bravo Sports, Designs and manufactures outdoor chairs and related
09/01/17 ShelterLogic - - -
Outdoor Division accessories.

08/21/17 Traeger Pellet Grills AEA Investors Manufactures wood pellet grills for outdoor cooking. - - -

Distributes sports and outdoor products to customers

08/13/17 Alliance Sports Capital Southwest - - -
worldwide.
Offers golf apparel and accessories including luggage,
08/03/17 TravisMatthew Callaway Golf $125.5 - -
shoes, socks, belts and hats.

07/27/17 Best Made Bolt Threads Manufactures outdoor apparel and accessories. - - -

Camping World
07/27/17 Active Sports Retails outdoor equipment through an online platform. $70.0 - -
Holding
Kohlberg & Designs and manufactures sporting products intended for
07/14/17 K2 Sports $240.0 0.7x -
Company skiing and other recreational activities.
Battenfield Manufactures sportsman knives and tools for fishing and
07/12/17 Fish Tales $12.0 - -
Technologies hunting.
Superior
07/10/17 PlayCore Manufactures playground and park stuctures. - - -
Recreational
Manufactures and supplies luxury power boats intended for
07/06/17 Cobalt Boats Malibu Boats $130.0 0.9x -
recreational services.
Retails hunting, fishing, boating, camping, shooting and
07/05/17 Cabela’s Bass Pro Shops $4,832.4 1.2x 11.8x
related outdoor recreation products.
Monomoy Retails boating supplies, gear, apparel, footwear and
06/29/17 West Marine $290.7 0.4x 7.7x
Capital Partners related water life products.

Source: Capital IQ and Capstone Headwaters Research 4

 Recreational Products | Q1 2018

PUBLIC COMPANY TRADING & OPERATING DATA

Price % 52 Wk Market Enterprise LTM EV / LTM

Company 12/28/17 High Cap Value Revenue EBITDA Margin Revenue EBITDA
Amer Sports Corp. $27.42 87.1% $3,159.7 $3,886.3 $3,137.3 $320.9 10.2% 1.2x 12.1x

Brunswick Corporation $55.58 87.1% $4,873.8 $4,923.1 $4,736.8 $603.9 12.7% 1.0x 8.2x

Callaway Golf Co. $14.06 90.0% $1,329.2 $1,327.2 $1,020.8 $108.2 10.6% 1.3x 12.3x

Clarus Corporation $7.90 98.8% $237.3 $263.0 $159.4 $0.5 0.3% 1.6x NM

Dorel Industries Inc. $24.63 77.7% $800.6 $1,249.9 $2,549.4 $137.0 5.4% 0.5x 9.1x

Escalade Inc. $12.60 87.7% $181.1 $205.5 $170.9 $18.7 11.0% 1.2x 11.0x

Johnson Outdoors Inc. $63.75 83.7% $626.9 $516.5 $490.6 $55.2 11.3% 1.1x 9.4x

Lafuma SA $27.23 84.4% $193.4 $168.0 $185.8 $11.0 5.9% 0.9x 15.3x

EV = enterprise value; LTM = last twelve months Mean 8.4% 1.1x 11.0x
$ in millions, except per share data
NM = Not Meaningful Median 10.4% 1.1x 11.0x

Harmonic Mean 1.9% 1.0x 10.6x

Last Twelve Month Margin Performance

50% 45.3% 45.4%

43.0% 42.0%
40%
30.8%
30% 26.6% 25.1%
23.6%
20%
10.2% 12.7 10.6% 11.0% 11.3%
10% 5.4% 5.9%
0.3%
0%
Amer Sports Brunswick Callaway Golf Clarus Dorel Industries Escalade Johnson Outdoors Lafuma

Gross Margin % EBITDA Margin %

Last Twelve Month 1-Year Revenue Growth

20.0% 18.6%

15.0% 13.1%

10.0% 7.9%
5.7%
5.0% 3.2%
0.8%
0.0%

-5.0% -2.8% -3.3%

Amer Sports Brunswick Callaway Golf Clarus Dorel Industries Escalade Johnson Outdoors Lafuma

Source: Capital IQ and Capstone Headwaters Research as of December 28, 2017 5

 Recreational Products | Q1 2018

FIRM TRACK RECORD

has been acquired by has been acquired by has been acquired by

a portfolio company of

has been acquired by has been acquired by has been acquired by has been acquired by

a portfolio company of

strategic joint venture has been acquired by has been acquired by has been acquired by

a portfolio company of

has divested has been acquired by has been acquired by financial advisory

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 Recreational Products | Q1 2018

RECREATIONAL PRODUCTS REPORT CONTRIBUTORS

Sophea Chau
Director
schau@capstoneheadwaters.com | 617-619-3307

Sophea specializes in mergers & acquisitions, private placements and financial advisory services. Her
responsibilities include providing financial and valuation analysis, performing due diligence and drafting all
marketing materials.

Prior to joining Capstone, Sophea was an analyst at FTN Midwest Securities, a full-service investment
banking firm based in Cleveland. While working in their New York office, she focused on M&A advisory
for middle-market companies in a variety of industries, including healthcare, pharmaceutical services and
marketing & advertising. Sophea is Vice President of the Columbia Alumni Association of Boston and
holds a Bachelor of Arts in Economics from Columbia University.

Jacob Voorhees
Managing Director
jvoorhees@capstoneheadwaters.com | 617-619-3323

Jacob is a founding member of Capstone Partners. He focuses on asset positioning, strategy articulation,
due diligence and negotiations coordination. Formerly, Jacob was with Andersen Corporate Finance LLC,
where he focused his efforts on the software and direct marketing industries. He started his career in New
York City with Rabobank International, a multi-national Dutch investment bank headquartered in Utrecht,
the Netherlands. While at Rabobank International, Jacob worked in the mergers and acquisitions group
focusing on cross-border transactions in the consumer products, food and beverage industries.

The M&A Advisor named Jacob to its prestigious 40-UNDER-40 deal makers list in 2012. Jacob received
an MBA from the Sloan School of Management at Massachusetts Institute of Technology (MIT) and a BS
from Cornell University. Jacob is qualified as a General Securities Representative.

Lisa Tolliver
Director
ltolliver@capstoneheadwaters.com | 312-674-4532

Lisa has over 18 years of experience in the investment banking industry, primarily focused on advising
middle market private business owners in liquidity related transactions. As a Director based in Capstone’s
Chicago office, she works closely with clients to advise and execute domestic and cross-border M&A
transactions, recapitalizations and capital raises. Prior to Capstone, Lisa worked in the Capital Strategies
Group at Morgan Stanley Smith Barney and also spent 10 years working for the middle market investment
banking arm of Citigroup, where she was involved in the evaluation, marketing and closing of numerous
transactions involving private businesses and corporate divestitures. Over her career, Lisa has developed
M&A expertise in several industry sectors including government & defense, industrials, consumer
products, e-commerce and technology-enabled business services. Lisa received her BA on academic
scholarship from Illinois State University and is a Series 7 and 63 Registered Securities Representative.

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 Report Title | Q4 2017

Capstone Headwaters

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Capstone Headwaters is a premier investment banking firm dedicated to serving the corporate finance needs of middle market
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