Razor Group Being Sued by Two Acquired Brands

Chad Price of Kettlebell Kings feature

Chad Price, co-founder of Kettlebell Kings (contributed photo)

Razor Group, a Berlin-based aggregator of top-selling brands, and Factory 14, the UK rollup which it acquired in 2022, are being sued by two companies and their founders in interlocking charges of breach of contract and failure to live up to purchase agreements by not adequately funding their growth and expansion.

The founders of Tribe WOD, a maker of cross-training workout equipment, and Kettlebell Kings, a leading seller of kettlebells for workouts and related content, both say in court filings that Factory 14 and then Razor Group actively worked to kneecap their businesses and kill their earnout potential.

These cases are similar to other recent legal actions taken by brands against aggregators who acquired them, including a lawsuit against Branded Group by Austin Naturals in February and one last fall against SellerX by Regal Games. With a once mighty river of investment drying up, more consolidation of brand aggregators is expected, like SellerX’s recent takeup of Elevate Brands.

“We reject the allegations made against Razor Group in these lawsuits and will utilize all legal options to defend ourselves against the baseless claims,” said André Schneider, general counsel for Razor Group, in a statement.

Kettlebell Kings: Founders Say They Were Kept in the Dark

Kettlebell Kings was launched in 2012 when Chad Price and Nehemiah Heard were teammates on the Rice University football team; their friend Jay Perkins was the third partner. When they agreed to sell their company to Factory 14 in November 2021, it was a leader in its category, exceeded $5 million in sales and a fixture on the Fortune 5000, said Price. In the midst of the alleged issues with Factory 14 and Razor Group, he was featured in late December 2022 as an “industry shaker” by Bloomberg.

Price said the foundation of the deal with Factory 14 was an agreed-upon estimate that Kettlebell Kings could reach $20 million in sales in five years, a figure he and his partners thought conservative given sufficient backing.

Initially, the partners sought an investment that would enable them to purchase sufficient inventory to fuel the projected growth. They then began fielding a number of acquisition offers, eventually settling on Factory 14. As the acquirer lacked experience running brands, the lawsuit states, Price and Perkins agreed to stay on for three years as consultants to handle operations during the transition.

“We already had operating plans in place, and just needed inventory financing to do so,” said Price. “But the plan (with Factory 14 and subsequently Razor Group) was never executed, which canceled our EBIDTA gains.”

Price said he and Perkins were not given authority to purchase inventory, and the lawsuit alleges revenue was being “siphoned off” to other Factory 14 brands. The pair flew to Madrid in February 2022 to meet with Factory 14, where they learned the new owners wanted them to lend their operational expertise to manage Tribe WOD under a separate consulting agreement. At the same time, financial and other information was being withheld, the founders claim.

The following month, Price said they learned one of the withheld facts: Factory 14 had been sold to Razor Group, which had not been disclosed in their face-to-face meetings. He said the situation only deteriorated under the new ownership, with no material information shared and inventory not purchased, depressing sales and impacting the EBITDA earnout.

Kettlebell Kings alleges in the lawsuit its acquisition and the consulting agreement were “part of a pattern of acquisitions that bolstered the financials of Factory 14 solely for the purpose of additional capital raises and investments … (and the company) used the business reputation and success of the founders and Kettlebell Kings to make false representations to bolster its value in its transaction with Razor.”

After issuing a letter to Razor Group in August 2022 demanding that various problems with business operations be rectified, Price and Perkins met with company officials in Berlin. There, the lawsuit claims, they were promised a revised purchase agreement and increased compensation to oversee creation of standard operating procedures for all of Razor’s DTC brands.

While the partners spent the week mapping out inventory projections, website updates and operational procedures, the lawsuit states, it was all “merely a delay tactic to keep the dispute at bay while a capital raise was being undertaken by Razor.”

Tribe WOD: Our Business Reputation Was Leveraged

The legal action by Tribe WOD follows a similar pattern. Jared Bane, a nursing home administrator, and industrial designer Alexandre Vitet, founded the company in 2020 in Marblehead, MA, selling tactical-inspired cross-training equipment and gear. They initially fulfilled orders out of Vitet’s garage, then moved to a warehouse in Marblehead as the business blossomed, grossing $2.5 million in the first year through Amazon, Shopify and other platforms.

In 2021, Vitet continued to design new products and the company had manufacturing partners in Asia. They sold throughout Europe and the UK while posting self-produced content on Facebook, Instagram and YouTube, and a deal with DHL expanded Tribe WOD into Canada, Australia and New Zealand. After being purchased by Factory 14 in September 2021, the founders also stayed on in consulting roles.

Bane and Vitet similarly state in their lawsuit that Factory 14 leveraged the founders’ business reputation and success “to increase its value with respect to its transaction with Razor,” which had also not been disclosed to them.

“If Factory 14 or Razor had followed through on (promises to promote, grow and expand the business), Tribe WOD would have easily exceeded — if not doubled or tripled — what Factory 14 calculated as its trailing 12-month pre-closing annual EBITDA figure of $468,000, which was almost double the company’s EBITDA four or five months prior to the sale,” the company stated in its lawsuit.