Golfsmith’s Latest Acquisition All About Market Share

As part of its goal to become the dominant multichannel marketer of golf equipment, cataloger/retailer Golfsmith in late July bought Don Sherwood Golf and Tennis World. San Francisco-based Sherwood operates six Bay Area stores but doesn’t have a direct division.

The golf industry is “all about market share,” says Golfsmith president Jim Thompson. “As a true trichannel company, we needed to add new stores to our existing markets to add to our density formula to maximize the brand extensions and advertising efficiencies, and to let our customers know they can shop three ways.” Austin, TX-based Golfsmith, which with the inclusion of the Sherwood chain operates 36 stores, will open two Golfsmith stores, in New York and Connecticut, this year and at least four more stores by next May.

Thompson says Golfsmith is working with branding consultants to determine how the company will proceed beyond 2003 with the Don Sherwood stores. For now, the company is integrating Sherwood’s systems, personnel, and inventory. Although no layoffs are planned, Scott Sherwood, son of late founder Don Sherwood, has resigned as president but is staying on as a consultant.

The companies won’t divulge the purchase price, but according to one estimate, the $250 million Golfsmith paid less than five times Sherwood’s EBITDA. Don Sherwood took in $25 million in sales last year. Thompson says that Golfsmith had been discussing a deal with Sherwood for about two years. Golfsmith was bought last October by New York-based private equity firm First Atlantic Group for more than $100 million.

With First Atlantic willing to finance, Golfsmith has been in an acquisition mode. “We felt strongly that if there were an opportunity for retail or brand acquisition that was consistent with our focus that we’d pursue it,” says Thompson.

Golfsmith has no plans to change the Sherwood name at this point, but it does intend to add a Sherwood Website and perhaps a catalog.

“We’re discussing how to roll Sherwood out as a multichannel company,” Thompson says. “But I didn’t want to go through this acquisition with any focus beyond the first 60-120 days to make it seamless to customers. It’s been a very amicable acquisition.”

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