Group 3

MP!4007, MP14013,
MP14035, MP14050,
MP14054
Valuation Report : Spyder Active Sports 2004

Introduction
The David Jacobs founded Spyder Active Sports in 1978 producing high-end ski
sweaters. Positioned as a premium producer of skiwear, Spyder developed
proprietary fibers and, in 1988, secured sponsorship of the U.S. Ski Team, which
gave the brand great visibility. By 1995, sales growth was relatively flat, and there
was no decisive growth strategy. The company had been virtually the only player
in the niche high-end ski gear market, but management began to see competitors
entering this space.
In 1982, Jacobs partnered with his Japanese contract manufacturer Tsunehisa
Shimokubo to save Spyder.

In 1995, sales growth was stagnant. After consulting a group of advisors, Jacobs
decided that he needed to sell either part or all of the company to build a larger
capital base from which to move the company to the next level. CHB Capital
Partners (a private equity fund) partnered to a deal with two stage funding taking
stake up to 37.9% in the Year 1997.

Several key organizational changes followed the partnership with CHB: (1) The
company invested in a state-of-the-art IT system; this was critical for helping the
company transition to bigger accounts. (2) John Walbrecht was hired as the senior
marketing executive; Welbrecht was critical to the companys success and helped
transition Spyder to a marketing-driven firm. (3) Spyder developed a fixture
program with many of its retailers through which its products were given
dedicated floor space in department stores.

The initiatives and others resulted in significant revenue growth. The time of the
case is 2004, and CHB wants to exit its position in Spyder. Jacobs now has to
consider his options.

Problem Identified
o IPO: Although and IPO might be seen as an option, it is highly
unlikely given the relatively small size of the firm and the highly
seasonal nature of the business. Spyder would need to be
substantially larger and less seasonal to make this a viable
option.
 o Sale to a Strategic: A strategic buyer would almost certainly
demand a controlling interest, so Jacobs and Shimokubo would
have to sell all or most of their equity.
o Private Placement with a Financial Buyer: Similarly, a private
placement would likely require Jacobs and Shimokubo to sell all
or most of their equity.
o Maintain Controlling Interest: This would likely reduce CHBs
options to a sale of its minority stake to another PE shop.
Jacobs must realize that most PE firms operate quite differently
than CHB, so a partnership with another PE firm will likely be a
very different experience for Jacobs.

Financial Analysis
DCF Analysis
WACC calculation
Conclusion
CHB being a PE firm wants to exit however Jacob is wanting to stay in the business.

The option of IPO was ruled out due to seasonality of products and small size of
firm.

The options were to sell to

a) Strategic buyer
b) To secondary Private Placement with financial buyer
c) To sell CHBs stake to another PE firm

CHB wish to exit with maximized return and thus value of firm to be ascertained.

A deal that provides a controlling interest for the buyer interest will be
more valuable than a deal than leaves the buyer with a minority
interest.
The potential for cost and revenue synergies also increase the value to
a suitor, but the likelihood that these synergies will be realized
depends, again, on control considerations that are reflected in the
ownership structure.
Other determinants of value:
o Growth potential
o WACC and Cash flows

CHBs Enterprise Value as calculated

Sales Multiple is $109.586 mn at 1.28x EV/Sales comparables

EBIT Multiple is $150.643 mn at 10.77 x EV/EBITDA comparables
DCF Valuation is $237.536 at 9.10% WACC and 3% TV growth