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Alex Ovechkin boosts Bauer brand in Russian play Add to ...

While Nike’s hockey ambitions took a toll on Bauer, Davis is careful not to disparage the former owners. (He joined the company as chief financial officer in 2004, became chief operating officer in 2006, and was appointed CEO by the new owners in 2008.) He acknowledges hockey wasn’t a priority for a company that dominates the athletic shoe business. “We learned a lot about different ways to do business,” Davis says. “The difference is, of course, we were a very, very small part of Nike. And if you’re at a leadership level there and deciding where to make your investments, you’re going to make it in footwear and apparel—because the growth opportunities are much bigger. We were quite happy to get new owners who had the desire to invest in ice hockey equipment.”

Once the deal with Nike had closed, Kohlberg and Roustan set about recapitalizing the business, culminating in a 2011 initial public offering. A private-equity player like Kohlberg won’t be a Bauer owner in the long term. The firm generally has a five-to-seven-year horizon on its investments; Bauer’s IPO was the first step in Kohlberg cashing out. At the start of November, Kohlberg sold another 6.3 million of its Bauer shares for $12.15 each, reducing its stake to about 12%. The firm has done pretty well on its investment so far: The sale price of the shares was more than 60% higher than the IPO price.

The Bauer that emerged from the IPO was leaner and more hockey-centric than it had been in a long time. And now that the company was public, it had investors who would be looking for growth. But hockey enrolment numbers in Canada and the U.S. were flatlining, if not falling slightly, as some parents steered their children toward sports that involve fewer injuries and lower costs.

So Bauer didn’t stay hockey-centric for long. Almost immediately, it went hunting for acquisitions, racking up a series of deals that pushed the company into new areas, such as lacrosse and baseball.

After buying hockey brand Mission-Itech of Kirkland, Quebec, in 2008, Bauer purchased New York-based Maverik Lacrosse in 2010, giving it an entrée to a sport whose equipment has similar designs and technology to hockey. Then in June, 2012, Bauer spent $64 million (U.S.) to buy Cascade Helmets Holdings of Liverpool, New York. A few months later, in October, it acquired Inaria, a sports apparel and uniform manufacturer in Toronto. And in April of this year, Bauer paid $4 million for Combat Sports, an Ottawa company that specializes in composite materials for bats, as well as for lacrosse and hockey sticks.

The strategy, explains Davis, is to pull other manufacturers into the Bauer fold—manufacturers that can help drive innovations in hockey gear, while Bauer meanwhile also injects new capital into the original businesses so they can grow. Athletes tend to want the same things, regardless of sport, Davis says: light, durable, high-tech gear that makes them better at what they do. “It was a reasonable extension for us to say, can we take what we are really good at in ice hockey and leverage it in other sports.”

The Nike days are long gone. “Other than the fact that we still manufacture, sell and design Bauer hockey products, we are a completely unrecognizable business compared to what we were under Nike.”

But Bauer’s acquisition binge was to change the nature of the now-public company in another way as well: Bauer is using its balance sheet to buy growth. “When you look at Bauer with their legacy hockey business, because North America is pretty saturated—just not a lot of participation growth—there’s really not a lot of organic growth there,” says National Bank’s Johnson. “Hockey is obviously still the meaningful chunk of their business, so they’ve been kind of forced to acquire just to keep the growth momentum on track.”

The problem with that kind of strategy is that it eventually burns itself out: The well of acquisition candidates runs dry, the balance sheet tightens or the company finds itself too levered as a result of deals. Bauer needs market growth as well.

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