Dec 13, 2023

Outdoor Recreation Market Update – December 2023

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Recent Large-Scale Deals Drive Outdoor Recreation Market M&A Activity

Consumer behavior has continued to perplex market participants as each pullback in spending has seemingly been followed by a resurgence of demand in the Outdoor Recreation market. Through Q3 2023, consumers have largely demonstrated category stickiness. Consumer resilience appeared to be tested in August when personal consumption expenditures on sporting equipment, supplies, guns & ammunition fell 0.9% month-over-month (MoM)—only to be met by a 0.7% MoM increase in September, according to the Bureau of Economic Analysis.1 Spending on recreational goods & vehicles has followed a similar trend, rising 0.8% MoM in September following a 0.2% decline in the prior month. A sustained higher interest rate environment is expected to continue to challenge consumer strength in the coming quarters. However, with wage growth surpassing inflation, consumers may be regaining purchasing power to fuel discretionary spending—particularly for outdoor recreation and enthusiast products.

Top-line growth has moderated for many sector players as the initial pandemic-fueled wave of new entrants has calmed. However, market participants have benefited from an easing freight cost environment and cost disinflation in recent months. Notably, while YETI (NYSE:YETI) recorded flat sales growth in Q3, it grew its gross margin to 58.0% compared to 51.3% in the prior year, according to its earnings release.2 Johnson Outdoors (Nasdaq:JOUT) experienced a similar year-over-year (YOY) profitability improvement, growing gross margin to 41.5% from 36.1% despite net sales falling 8.2% in its third fiscal quarter, according to its earnings release.3 However, many segments across the Outdoor Recreation market have struggled in public equity markets through year-to-date (YTD). Tactical & Hunting segment participants have shown the greatest insulation from headwinds, with the stock prices of Smith & Wesson (NasdaqGS:SWBI), Axon (Nasdaq:AXON), and Cadre (NYSE:CDRE) all rising over 35% YTD.

Sector players have sought to streamline operations, simplify business segments, and focus on core competencies. This has spurred both acquisition appetite and divestitures of business units in the Outdoor Recreation market through YTD 2023. Moving through year end and into 2024, sector participants with defensible gross margins, robust cash flows, and a sticky customer base are poised to experience healthy buyer appetite. Lulls in merger and acquisition (M&A) markets are often followed by a surge in dealmaking—a forecast anticipated to materialize towards the first half of 2024.

It is very interesting times in the Outdoor Recreation market. We have witnessed several groundbreaking acquisitions including Marucci, Vista’s Sporting Products business, and United Sports trading hands again. While corporate buyers remain aggressive, M&A volumes are down with most private equity firms content to wait out the market uncertainty. We believe the significant amount of M&A dry powder waiting to be deployed will bring about a perfect ‘seller’s market’ which we anticipate could be as early as the summer of 2024.

Ken WasikManaging Director and Head of Consumer Investment Banking, Capstone Partners

Strategic Buyers Drive M&A Activity in a Challenged Outdoor Recreation Market

M&A transaction volume has slowed through YTD 2023, falling 37.5% YOY to 70 deals announced or completed. Elevated interest rates, uncertainty surrounding the sustainability of consumer spending, and challenged revenues have facilitated caution among buyers. Strategics have largely driven the M&A market through YTD, comprising 84.3% of total transactions.

While the M&A market has remained tepid, sector players have continued to pursue target companies that offer synergies, complementary offerings, or new revenue opportunities. This has been evidenced by Fox Factory’s (Nasdaq:FOXF) acquisition of Marucci Sports from Compass Diversified (NYSE:CODI) for an enterprise value of $572 million and equivalent to 3.1x EV/Revenue and 11.4x EV/EBITDA (November). The sale of Marucci represents a healthy return for Compass Diversified, which bought the business for $200 million in April 2020 and scaled it through the acquisitions of Lizard Skins (October 2021, undisclosed) and Baum (April 2023, undisclosed) which totaled $75 million, according to its investor presentation.4 Fox Factory was also previously owned by Compass Diversified, which may have contributed to their interest in Marucci and perceived synergies. Marucci is a leading designer and manufacturer of baseball and softball equipment and apparel—which falls outside of Fox’s existing Specialty Sports Group segment offerings. However, Fox Factory experienced a significant drag on revenues in its most recent quarter, with net sales falling 19.1% and declining 58.6% in its Specialty Sports Group, according to its fiscal Q3 earnings release.5 The acquisition may serve to bolster and diversify sales in the coming quarters, although successful integration and realization of potential synergies will be key. “This transaction makes us better from day one—not just by being immediately accretive in terms of both revenue and profitability, but by further diversifying our offerings and providing us additional leverage to extend the value of our brands,” commented Mike Dennison, Fox’s CEO, in a press release.6


Financial buyers have been increasingly selective in the current market and have slowed acquisition pursuits in the Outdoor Recreation & Enthusiasts space through YTD. Private equity firms have accounted for a modest 15.7% of total deals, a steep drop from comprising 22.5% of transactions in 2022. A higher interest rate environment has caused sponsors to increasingly scrutinize cash flows of targets, pursuing those with the ability to rapidly service debt. With transaction financing costs elevated, the increased equity contribution needed to complete deals has the potential to adversely weigh on internal rates of return. However, select sponsors have sought to deploy capital to the space towards proven, scalable brands. In November, Norwest Equity Partners, a leading middle market investment platform, acquired United Sports Brands for an undisclosed sum. United Sports holds a collection of brands including Shock Doctor, McDavid, Cutters, Nathan, PEARL iZUMi, and Glukos. Norwest Equity Partners had previously acquired Shock Doctor in 2008 and subsequently sold the brand to Bregal Partners in 2014; leading to the creation of United Sports Brands.

Vista Outdoor Sheds Sporting Products Segment, Driving Potential Valuation Expansion

Tactical & Hunting segment players have been cognizant of the political and social scrutiny surrounding firearm manufacturing operations. On the M&A front, financial buyers in particular, have been wary of pursuing firearm manufacturing companies as select limited partner bases often have firm stances against investment in the space. However, appetite has persisted for quality segment assets. Notably, in September, Warren Kanders, who owns 15.4% of Clarus' (Nasdaq:CLAR) shares, submitted a non-binding bid to acquire Clarus' Precision Sports segment for $160 million. Kanders advocated that the bid would provide financial flexibility for Clarus and allow it to focus on its Outdoor and Adventure segments, according to a press release.7

Established firearms and ammunition providers have remained active buyers of tactical products assets in the current market. In October, Vista Outdoor (NYSE:VSTO) announced a definitive agreement to sell its Sporting Products segment to Czechoslovak Group (CSG) for an enterprise value of $1.9 billion, equivalent to 5.0x EV/EBITDA. Vista's Sporting Products segment comprises Firearms and Ammunition brands including Remington, Hevi-Shot, CCI, and Speer. Upon completion of the sale, Vista's Outdoor Products business would become an independent public company, Revelyst (to be traded on the New York Stock exchange under the ticker GEAR), with brand categories including Fishing, Bike Hydration, Golf GPS, and Motocross. However, since the announcement, Vista received an unsolicited offer from Colt CZ Group (SEP:CZG) in which Colt CZ and Vista Outdoor would be combined in a cash and stock transaction. The offer valued Vista Outdoor at $30 per share, or $1.7 billion, according to a press release.8 Vista rejected the merger offer, communicating that it had undervalued the company. “We think Revelyst will likely resume add-on acquisitions of outdoor brands after the sale of Vista Outdoor’s Sporting Products segment is complete,” commented Pete Bailey, Director at Capstone Partners.

Vista is not the first large sector player to look to separate its outdoor products offerings from firearms operations. In August 2020, American Outdoor Brands (Nasdaq:AOUT) completed its spin-off of its Outdoor Products & Accessories business to create two publicly traded companies—Smith & Wesson Brands, which focuses on firearms, and American Outdoor Brands which provides rugged outdoor products. Valuations often favor outdoor products providers over firearms players, with American Outdoor Brands trading at 13.0x EV/EBITDA compared to 6.9x EV/EBITDA for Smith & Wesson, as of November 2023.

Vista hopes to experience similar trading multiple expansion following an assumed completion of the sale of its Sporting Products business to CSG. Vista has historically traded around 5.0x EV/EBITDA, however, the newly formed Revelyst platform may be valued as more of a pure-play outdoor enthusiast brand. In comparing similar publicly traded companies offering action sports, outdoor recreation, or outdoor accessories products, average EBITDA multiples have amounted to 13.4x. However, Vista's Outdoor Products gross margin of 28.8% is notably lower than the index average of similar public companies, which stands at 42.1%.

M&A Market Recovery Anticipated in 2024 for Outdoor Recreation Market

Moving through year end, sector M&A volume may remain strained, but transaction inventory has been building. Many prospective sellers have waited for greater economic transparency and recovery of revenues before launching a sales process. Strategics are forecasted to continue to drive the M&A market in the Outdoor Recreation & Enthusiasts space in the coming months as high transaction financing costs and uncertain target company revenue forecasting have largely kept sponsors on the sidelines. Privately-owned businesses with healthy gross margins, recurring revenue, and category leadership are expected to garner strong acquirer interest in the new year.

To provide an update on your business or learn about Capstone's wide range of advisory services and Outdoor Recreation market knowledge, please contact us.

Connor McLeod, Vice President, was the lead Market Intelligence contributor to this article.


  1. U.S. Bureau of Economic Analysis, "Consumer Spending,", accessed November 13, 2023.
  2. YETI, "YETI Reports Third Quarter 2023 Results,", accessed November 13, 2023.
  3. Johnson Outdoors, "Johnson Outdoors Reports Fiscal Third Quarter Results,", accessed November 13, 2023.
  4. Compass Diversified, "Compass Diversified Q3 2023 Earnings Conference Call,", accessed November 13, 2023.
  5. Fox Factory, "Fox Factory Holding Corp. Reports Third Quarter Fiscal 2023 Financial Results and Announces Agreement to Acquire Marucci Sports,", accessed November 13, 2023.
  6. Bicycle Retailers, “Fox Factory completes purchase of Marucci Sports,”, accessed November 20, 2023.
  7. SGB Media, "EXEC: Chairman of BDE’s Parent Makes Bid To Acquire Its Ammo Business,", accessed November 13, 2023.
  8. SGB Media, “EXEC: Vista Outdoor Receives Unsolicited Offer to Acquire Company,”, accessed November 30, 2023.

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