L.A.B. Golf sold to private equity firm

[dcmidnight]

Well I was wrong the article says they are already on track to do 400,000 this year.

Scotty's gotta be kicking himself, getting back in the shop making some $2,000 ZT options...

[erock9174]

Does anyone know how 130k units compares to the sales of other well selling putters like a TM Spider, Ping Anser, Scotty Cameron, Odyssey #7 etc ?

[bladehunter]

6 hours ago, JungleJimbo said:

 

 

Encouraging. But I’ll believe it when I see it.
 

I’m familiar with several healthcare PE buys. And they destroy all they touch. Almost in a serial killer that keeps in contact  style of constant attack, gaslight , rinse repeat … so the culture turns to terror and silence.  Squeezing out the higher paid employees in favor of useless newbies that don’t care about the culture or product. 

 

knee jerk - don’t know if this means time to dump all LAB putters while they will fetch what you paid ?  Or play on for the play itself.  Knowing eventually they’ll be worth what the original DF 2.1 was before Sam bought it.  About  $80. 🤣.  I make too many putts to sell. So I guess I know what I’ll do.  

[braincramp52]

Another good company that will be ruined.

[braincramp52]

22 hours ago, jda said:

You usually don't have to sell to PE if you are not at least in some trouble financially - PE rarely pays market value, outbids anybody and don't generally acquire companies that can make it on their own.  Solid companies with good financials are not all that hard to sell to a variety of buyers.  This sucks.  Nobody deserves PE.

 

Don't believe any of the "good things to come" or "they believe in our product" or "I will be around to oversee things" type of stuff.  This is acquisition 101.  While a few brands can come out of PE OK, most go downhill.

This^

[Llortamaisey]

2 hours ago, AlpineGolf said:

 

Financial journalists rarely get this right. Most of the time, official deal values are enterprise values on a cash-free, debt-free basis, rather than equity values of specif stakes acquired. For startups, that usually ends up being pretty close to the overall equity value, since they typically don’t have much, if any, debt.

 

 

I’m having a hard time buying the idea that LAB can scale to 390,000 units per year. Reports indicate they produced around 130,000 units last year, and projecting a 3x increase for 2025 seems pretty ambitious given the underlying requirement to scale production (putters aren’t software...). For an equipment manufacturer, I’d typically expect normalized EBITDA margins in the 10–20% range. LAB may be on the lower end, given its earlier stage, but for valuation purposes, let’s assume a normalized margin.

 

If we take the unit volume and average selling price at face value and use an average case, we land somewhere between $4 million and $23 million in stabilized EBITDA—the former being the low end (lower margin x 2024E sales), and latter the high end (higher margin x 2025E sales). Let’s split the difference and use $14 million as a base case. Assuming the reported $200m enterprise value is accurate, that implies an EBITDA multiple north of 14x. Is that high or low compared to comps? It depends—but that’s definitely rich, especially for a niche player.

 

To be clear, I fully recognize this is a growth PE transaction. However, the TAM (total addressable market) is inherently limited, and the business doesn’t offer the kind of scaling potential you’d see e.g. in a typical tech investment.

 

Yes, the growth story helps justify a premium, but having spent the past decade in private equity, I can say institutional investors are typically wary of "one-trick ponies." Revenue concentration, trend/fad risk, and lack of product diversification are real concerns.

LAB is heavily reliant on one innovation—zero torque putters. Larger competitors offer a broader lineup and are better insulated from shifts in consumer trends. If the novelty fades or zero torque falls out of fashion, sales could drop off sharply. Competitors moving into the ZT space could put pressure on prices.

 

So, even if we accept the current estimates and assumptions, this valuation doesn’t look cheap—especially given the execution risk and uncertainty.

 

It sounds like what you’re saying is that the guys from LAB went to the closing with a ski mask and a knife. 

[braincramp52]

I'm not an expert on anything. But, I've been in the sales game for 40 years and typically one thing that does happen with deals like this is quality normally suffers.

[IC3BURGH]

I really hope the "insight" posted in this thread is not indicative of the insight posted elsewhere on this forum.

[braincramp52]

2 minutes ago, IC3BURGH said:

I really hope the "insight" posted in this thread is not indicative of the insight posted elsewhere on this forum.

You're not from around here are you?😅

[IC3BURGH]

1 hour ago, erock9174 said:

Does anyone know how 130k units compares to the sales of other well selling putters like a TM Spider, Ping Anser, Scotty Cameron, Odyssey #7 etc ?

 

I believe the numbers that were floating around earlier this year was dollar market share at domestic retail (Golf Datatech is the primary source), but at the time LAB was third at 18%.

 

1) Odyssey

2) Scotty

3) LAB

4) Taylormade

5) Ping

[IC3BURGH]

4 minutes ago, braincramp52 said:

You're not from around here are you?😅

 

I said hope, but I know it is.

[Barracuda]

10 hours ago, Tyrick24 said:

Dealers don't have to pre pay. Source - I am one.

I went from 30 day net when nobody was buying, to prepay. Custom orders takes almost 10 weeks. 

[Tiger_Stud]

1 hour ago, IC3BURGH said:

I really hope the "insight" posted in this thread is not indicative of the insight posted elsewhere on this forum.

Why? Did someone say that the deal has too much offsett and has too wide of a sole?

[LongNwrong27]

1 hour ago, braincramp52 said:

I'm not an expert on anything. But, I've been in the sales game for 40 years and typically one thing that does happen with deals like this is quality normally suffers.

By definition it basically has to. These PE firms are bloodsucking leeches who add no value and merely extract. 

[ilikegolf26]

Glad I bought my LAB putter a few months back before the product goes to absolute crap!

[jda]

Sold a company valued between 1.5 and 5B (yes, B) for less than $100m.  Valuation and price are not the same thing and people can value a company however they want.  Tech Crunch just published the number that the buyer told them, which was $5b, all the while telling us how the company was only valued at that number once they acquired it and we had their resources and support.  Nobody is going to likely ever know how much the majority stake ever sold for.

 

I find it amazing that people on here think that PE don't have access to the internet or are not smart.  The whole idea that somebody sold at the top of the market indicates that the other side is too dumb to know that we are coming off a golf boom, other brands are building the same things now, etc.  PE is not dumb.

 

This is just a guess, but I would say about $20-25m changed hands for a majority stake.  New company values at $200m with their expert help and assuming that everything goes perfect moving forward.  Old owners see that they could make up to another $80-100m in a handful of years if the company takes off since they do own part of it still.  For me, I just cannot get over that if earnings were SOOOOO good, then why could they not already buy a few more machines and hire a few more people - cash should have been flowing if all of these numbers are accurate.  All of this seems fishy to me and like a company who needed to sell.

 

The admittance that they have been looking for 2 years is kind of telling.  Talked to a VC that invested in my companies who is a huge golfer and he said that if LAB had great numbers, they could have likely had an agreement in principle in 30 days and kept control.  Also does not understand why they have not scaled already if they had so much revenue.  He reminded me that nearly nobody wants to lose control of their company unless they just sell out completely and Steve Miller Band (take the money and run) - selling a majority stake is almost always a last resort.

[me05501]

Wonder if lie-angle balanced wedges could be forthcoming...

[jda]

Also, a guess, but predict that all stock putters to be produced overseas now.  Only custom stuff done in Oregon.

 

I do expect to see some cross-branded stuff.  Long overdue.  If SC can sell out of French Laundry putters in a few seconds and Bettinardi can work with Thompson Machine Guns and Buffalo Trace (?) Whiskey, then why not?  It is just smart.  Moet & Chandon in a Pretty Cabinet on the bottom of a LAB putter called the Killer Queen?  This would sell.

 

Also need to get the Japanese market into this.  Honma can sell $5k drivers there with platinum and real gold, so why not Louis Vuitton branded putter with real rubies and emeralds on the top.

[ChaosTheory]

This is every entrepreneur's dream jackpot.

First Bill Presse invents the better mousetrap.

Then Sam Hahn discovers it and realizes it has untapped potential.  He makes it into a high margin growth company.

Buyers like high margin growth companies.  Congrats to Bill and Sam and any silent investors! 

 

I don't know what will happen and I don't care.  Apparently, dealing with LAB has become inconvenient, so it is likely to get better.  Obviously they needed to scale up to some degree. 

 

Not losing any sleep over this. 

[DocBrown3887]

25 minutes ago, me05501 said:

Wonder if lie-angle balanced wedges could be forthcoming...

A LAB Chipr had crossed my mind in the past not gonna lie, lol

[me05501]

8 minutes ago, jda said:

Also, a guess, but predict that all stock putters to be produced overseas now.  Only custom stuff done in Oregon.

 

I do expect to see some cross-branded stuff.  Long overdue.  If SC can sell out of French Laundry putters in a few seconds and Bettinardi can work with Thompson Machine Guns and Buffalo Trace (?) Whiskey, then why not?  It is just smart.  Moet & Chandon in a Pretty Cabinet on the bottom of a LAB putter called the Killer Queen?  This would sell.

 

Also need to get the Japanese market into this.  Honma can sell $5k drivers there with platinum and real gold, so why not Louis Vuitton branded putter with real rubies and emeralds on the top.

 

Right on. 

 

I'm sure Odyssey, TM and the other brands appreciate the effect L.A.B. has had on pricing. They weren't selling nearly as many $300-400 putters before. 

[Rory4Pres]

So one of the differences that will come out of this is right now Lab only had 1 cnc machine (i think, that could have changed recently) that was primarily used for R&D.  They were outsourcing the production of the machined heads from local cnc machine shops.  I expect that to change.  They will likely invest in a bunch of cnc machines to do the production of the heads in house.  Typically these cnc machines range somewhere between $250k-$1/mil each so it takes a big investment to bring that in house.  Just as easily, they could choose to source the machined parts from china in bulk.  White rust on the aluminum would become a major concern if they went that route.  Yes, they would obviously try to remove that and then paint them but often times it impacts the quality of the paint job and really impacts the quality of the finish of the putter long term.  So this would be an example of a decline in quality if they were to go through China.  

[norcaltrojan]

Given their rapid growth and inability to scale production, this outcome was inevitable. LAB was at an inflection point, with two options: load the company with debt to scale production and hire the required experts on their own, or bring on a PE partner. By bringing on a PE partner, they get their windfall, experts in-house, and access to cheap capital to help them scale. They diversify the risk while taking a reward.

 

I've seen numbers in the 12-14x profit range for the $200M valuation. With that level of multiple, this isn't going to be a Toys R Us type of pillage. Most of the negative PE stories involve vulture funds buying established companies and stripping them for parts. LAB lacks the necessary footprint and assets for that model to be effective. 

 

To make this deal work, L Catteron needs to 2-3x revenue while holding or improving margins. Having just waited 12W for my custom DF3, the low-hanging fruit is to inject significant investment into scaling production to get the lead time down to 2-3 weeks. In doing so, they will also be able to fulfill wholesale orders for big box stores. The other part of this is that the capital and production will enable them to develop new models faster without compromising their current lines. More products, higher "stock" availability, and faster "custom" delivery times are how they accomplish that.

 

Overall, I'm excited to see where they can take LAB over the next few years. Yes, there is a chance they'll implode, but I don't think those chances are any worse than if they had stayed solo and let the current production issues drive them into the ground, or had decided to load the company with debt and been left holding the bag themselves. 

[ochowie]

2 hours ago, Rory4Pres said:

So one of the differences that will come out of this is right now Lab only had 1 cnc machine (i think, that could have changed recently) that was primarily used for R&D.  They were outsourcing the production of the machined heads from local cnc machine shops.  I expect that to change.  They will likely invest in a bunch of cnc machines to do the production of the heads in house.  Typically these cnc machines range somewhere between $250k-$1/mil each so it takes a big investment to bring that in house.  Just as easily, they could choose to source the machined parts from china in bulk.  White rust on the aluminum would become a major concern if they went that route.  Yes, they would obviously try to remove that and then paint them but often times it impacts the quality of the paint job and really impacts the quality of the finish of the putter long term.  So this would be an example of a decline in quality if they were to go through China.  

 

I feel like believing that a PE firm is going to make a large CapEx outlay immediately after acquiring a majority stake in a company is pretty foolish.

 

I think someone else mentioned this, but I would expect that anything that can be outsourced will be outsourced. Initially it will be all "stock" putter orders and those sent to big box stores will almost assuredly be outsourced as fast as possible. Additionally, I would expect any hand balancing still being done to also be replaced with an automated process. Over time, i think there will likely be a way to get something close in quality to the current LAB line but I would guess it would be significantly rarer and significantly more expensive than it is now.

Edited July 29 by ochowie

[norcaltrojan]

Is there any proof that LAB still mills their heads in the US? A buddy with a wholesale account and years of experience following LAB mentioned that the DF3 heads are milled in Mexico. My DF3 also doesn't have anything on it saying that it was milled/built/assembled in the USA. I feel like at 160,000 units last year the narrative around all the heads being milled in small shops in Oregon is completely unrealistic and that ship has already sailed

[Rory4Pres]

I was only going off of the last couple of youtube tours I watched based on their manufacturing process.  I would assume they'd be bringing the cnc'd heads in from multiple sources at that volume.  

[shankasaurus rex]

The lack of business acumen willing posted in this thread is hilarious. Thanks to all that have posted a more balanced (and fact-based) view of PE investment.

Edited July 29 by shankasaurus rex

[thetrick]

I don’t work for LCAT or LAB., but I’ve worked with a handful of LCAT brands as a contractor/consultant and haven’t seen any go into mass production where quality goes to hell. There’s definitely bad PE out there, but LCAT doesn’t have that track record from my experiences. They respect the current culture of the company and audience and I’m excited to see where they take LAB. Profit is and will now be the #1 priority but I'm optimistic quality and R&D will not take a big hit.

[WesternRacing]

6 hours ago, jda said:

Sold a company valued between 1.5 and 5B (yes, B) for less than $100m.  Valuation and price are not the same thing and people can value a company however they want.  Tech Crunch just published the number that the buyer told them, which was $5b, all the while telling us how the company was only valued at that number once they acquired it and we had their resources and support.  Nobody is going to likely ever know how much the majority stake ever sold for.

 

I find it amazing that people on here think that PE don't have access to the internet or are not smart.  The whole idea that somebody sold at the top of the market indicates that the other side is too dumb to know that we are coming off a golf boom, other brands are building the same things now, etc.  PE is not dumb.

 

This is just a guess, but I would say about $20-25m changed hands for a majority stake.  New company values at $200m with their expert help and assuming that everything goes perfect moving forward.  Old owners see that they could make up to another $80-100m in a handful of years if the company takes off since they do own part of it still.  For me, I just cannot get over that if earnings were SOOOOO good, then why could they not already buy a few more machines and hire a few more people - cash should have been flowing if all of these numbers are accurate.  All of this seems fishy to me and like a company who needed to sell.

 

The admittance that they have been looking for 2 years is kind of telling.  Talked to a VC that invested in my companies who is a huge golfer and he said that if LAB had great numbers, they could have likely had an agreement in principle in 30 days and kept control.  Also does not understand why they have not scaled already if they had so much revenue.  He reminded me that nearly nobody wants to lose control of their company unless they just sell out completely and Steve Miller Band (take the money and run) - selling a majority stake is almost always a last resort.

 

Spent my entire career doing this, and I agree with a lot of what you said, but not all.  The challenge with extrapolating company valuation from a partial investment lies always in the terms and structure of the deal.  Based on the numbers quoted, if the buyer did take a majority ownership position (I.e, if by control they mean 51%+, not minority with controlling rights), then the valuation number is likely simply a gross up of that number and is a fair indication of value for the company.  There’s no way they paid $20-25 for 51% and then disclosed it at $200 million.  It would make no sense.

 

Where the public disclosure gets stupid is when a VC buys a minority preferred equity position with all sorts of rights and preferences that adds value to their shares over and above the other classes, and then that transaction is extrapolated over the entire equity pool.  That is almost always wildly inaccurate, unless the company is very close to a transaction.

 

As regards selling controlling interest, I’ve had numerous clients sell controlling interests in their private company when they were ready to at least partially exit.  In doing so, they demanded/commanded a much better valuation than they would have otherwise gotten.  It’s not only a valuation issue for many of these entrepreneurs, it’s derisking their financial future, which is very important to a lot of people.

[me05501]

7 minutes ago, WesternRacing said:

 

Spent my entire career doing this, and I agree with a lot of what you said, but not all.  The challenge with extrapolating company valuation from a partial investment lies always in the terms and structure of the deal.  Based on the numbers quoted, if the buyer did take a majority ownership position (I.e, if by control they mean 51%+, not minority with controlling rights), then the valuation number is likely simply a gross up of that number and is a fair indication of value for the company.  There’s no way they paid $20-25 for 51% and then disclosed it at $200 million.  It would make no sense.

 

Where the public disclosure gets stupid is when a VC buys a minority preferred equity position with all sorts of rights and preferences that adds value to their shares over and above the other classes, and then that transaction is extrapolated over the entire equity pool.  That is almost always wildly inaccurate, unless the company is very close to a transaction.

 

As regards selling controlling interest, I’ve had numerous clients sell controlling interests in their private company when they were ready to at least partially exit.  In doing so, they demanded/commanded a much better valuation than they would have otherwise gotten.  It’s not only a valuation issue for many of these entrepreneurs, it’s derisking their financial future, which is very important to a lot of people.

Last paragraph resonates. They’re trading a relative illiquid asset for the opposite of that. Timing is probably good from an economic perspective as well though who can tell. Money supply has surged like crazy again.