Martin Palomar, Tom Bendinelli, Dorian Song and Léo Clément (HEC Paris)
Photo: Coen van de Broek (Unsplash)
On January 24, Accell Group (a leader in the market of e-bikes in Europe) announced that KKR (a private equity firm) bid an all cash offer for €58 per share, thus valuing the bicycle maker at €1.56 billion. Compared to Accell’s stock price during the three previous months, KKR’s bid represents a premium of 42%. This high offer acknowledges the rise of the market for e-bike and its particular importance in Europe. However, the firm from the Netherlands also benefits as other bike-makers from the effects of the pandemic, so there is a risk that the company might be overvalued, depending on how long-lasting the habits taken during the past two years persist.
Overview of KKR
KKR & Co. L.P. (formerly Kohlberg Kravis Roberts & Co.) is an American investment fund and one of the oldest and largest in the world. Since its founding in 1976, it has completed some of the world's largest leveraged buyout transactions, a financial acquisition technique it pioneered. The fund currently has $459 billion under management. The name KKR comes from the names of its three founders, Kohlberg, Kravis and Roberts. Its main shareholders are ValueAct Capital Management (9.27%), The Vanguard Group (7.01%) and Vulcan Value Partners (4.74%).
Overview of Accell (target)
Accel Group makes bicycles, bicycle parts and accessories. They are the European market leader in e-bikes and second largest in bicycle parts and accessories, with numerous leading European bicycle brands under one roof such as Lapierre, Kogas Raleigh or Ghost. Accell Group employs approximately 3,100 people across 15 countries and sells its products in more than 80 countries. In 2020, they sold 897 thousand bicycles and recorded a turnover of €1.3 billion. Accell Group’s shares are traded on the official market of Euronext Amsterdam.
Accell Group stated in their press release that the takeover and reverse-IPO that KKR will execute on the bike manufacturer will allow the group to carry out its growth agenda more quickly and securely. Becoming private means they will have more flexibility when raising capital for long term projects.
Ton Anbeek, the bicycle group’s CEO said that the financial sturdiness and expertise of the shareholder consortium will enable the company to deploy its agenda of innovation and brand development : as a company fulfilling a demand for environmentally-conscious mobility. The Dutch company wants to develop its bicycle brand portfolio around the world. The CEO also mentioned a readiness of the group to perform suitable acquisitions that would allow the group to leverage their scale.
The company also expects the Consortium to be able to help it solve supply chain setbacks like those recently experienced during the pandemic due to global disruption in supply chains.
It seems KKR has many reasons to execute such acquisition which fit in with the asset manager’s vision for its European portfolio. Daan Knottenbelt, Partner and Head of BENELUX, said that through this acquisition KKR seeks to establish the Netherlands as the European capital of electric mobility. This investment is an expansion to the manager’s mobility portfolio (among which we find names like Lyft, Gojek, Zwift, Boots and Wella), however Accell is the first bicycle-centric group the company acquires a stake in.
Risks and Uncertainties
Being an alternative to public transportation, electric bicycles became increasingly popular during the pandemic thereby resulting in a 17% YoY increase of Revenues for Accell. As for many other winner industries of the pandemic, one may wonder if this trend is durable and will underpin sustained growth over the coming years.
Even if we assume sustained growth for the industry, the profitability of Accell may be disturbed by the accelerated investment of competitors in a market with actors bigger than Accell such as Giant Bicycles, Merida, Trek Bikes, Riese & Muller, Fritzmeier Systems GmbH & Co. and others. Moreover, Venture Capital pouring into this sector has quadrupled over the four past years according to the Financial Times. This could potentially represent new competitors with innovative solutions, which could be neutralized through an acquisition by Accell itself or, on the contrary, by its competitors.
The e-bicycle industry’s recent success has been derailed by disruptions in the global supply chain, resulting in dramatically increased lead times for certain parts such as seats and forks. Accell must secure privileged contracts with parts manufacturers to avoid such disruptions and secure the development of its brand in Europe and abroad