Competitor Group has had five years under the ownership of private equity firm Falconhead Capital. But there’s a new holder of the front door keys, as of this morning, and that’s Calera Capital. The managing director of that firm is David Lorsch. He’s a very good masters athlete in his own right, both as a runner and as a triathlete. Private equity is typically meda averse, so, it was brave of him, and a treat for us, that Slowtwitch readers get to spend a bit of time with the engine behind the future growth and success of brand so important to runners, cyclists and triathletes.
Slowtwitch: I’d like to ask you the same question I asked Scott Dickey. It has been my observation that when private equity enters an industry, at the beginning stage of the ownership cycle, its first acquisition in that industry may not be its last. Is Competitor Group the first of the series of acquisitions in the endurance sports industry?
David Lorsch: I wouldn’t say we would do this as the first in a series of acquisitions. We tend to invest in a single platform in an industry. Competitor Group is that platform. But, Competitor Group has purchased properties, so, well grow organically, but maybe through acquisition as well. They bought a half marathon here in San Francisco, so, we will certainly continue to look at buying races.
ST: I was recently reading an OpEd, in the Washington Post. I was struck by a quote from the CEO of a mutual insurance company. He said, “I consider my job as more like that of a trustee. I was handed a franchise and a pool of capital that has grown steadily for 104 years, and my job is to pass it on to the next generation of customers in better shape than when I took it over.” I tend to look at some of what private equity has purchased in triathlon as the purchase of cultural institutions. Large daily newspapers like the Chicago Tribune mean a lot to people in their daily lives, and it has been ravaged by private equity. Sports franchises, and sporting events like the Boston Marathon or the Indy 500 might be privately owned, but their owners are really temporary, while these brands might be a century old and might live for a century more. How do you make private equity, or any sort of ownership where the shareholder is disinterested in terms of the cultural importance of the property, compatible with the best interest of the property?
DL: I totally agree with the quote you read, in terms of the approach of private equity broadly, but this in particular. We have to take an extremely long term view. You have to build the business for the very long term. We’re not going to own the business forever, but when we pass the business on at the end of the day it should be better for our involvement in it. My own perspective, look, I’m a passionate endurance sport participant, I love the industry, I totally get it that these events — while owned by the company — you’ve got to make sure you preserve that franchise and that experience. We’re coming at this as, “This has to be the best experience it can possibly be, absolutely the best content for those who’re reading the media.”
ST: it’s typically said that private equity is in a business for a 3 to 5 year window. Is this the typical ownership profile of Calera Capital?
DL: Our horizon is generally longer term than that. Our average investment has been held by the firm for over 6 years. We have properties we’ve owned for 10 years. In order to build value for our investors we have to take the company to the next level, and it can’t be done by financial engineering, it’s rare that you can do that in 3 years.
ST: I’m naïve to your industry, but if another private equity firm’s principal read what you said about “financial engineering,” might he say, “He’s taking a swipe at us.”?
DL: Maybe, but, there’s lot of different ways to make money. There’s nothing necessarily wrong with leverage, but, for our investors, customers, employees, you have to do it operationally, grow the company organically, to take it to the next level. That’s been our way since we started our firm 20-plus years ago. You have to help the company with its operations and execution.
ST: This sounds like a newer form of industry ownership doing business in a more traditional way, sort of like the old John Houseman Smith Barney commercials when he says, “We make money the old fashioned way; we earn it.”
DL: Some take the other view and it’s given the industry a bad rap, but there are a reasonable number of firms like us that are thoughtful and I think this is true of the industry as a whole.
ST: I’m intrigued by the RaceIt acquisition.
DL: Yes, I agree, there’s a great opportunity there. We look at the company much more broadly than the Rock ‘n’ Roll series. They’ve built the company around the full spectrum of what the customer wants: the races, the ecosystem, the ability to follow your friends, but, [as regards RaceIt] I would agree.
ST: So, you’re a triathlete, does this mean you’re a Slowtwitcher? Are you a forum reader? A lurker, or one of those troublemakers?
DL: I do read, I really enjoy the profiles of pros, the reviews of equipment. I’m a bike fanatic. You guys definitely are among the best in terms of coverage of products. Velo News is great as well! But I’m a fan of Slowtwitch.
ST: What do you ride?
DL: I have a couple bikes, a couple of Independent Fabrications, and my tri bike is a Guru Crono. I bought them from Studio Velo, a shout out to the finest pro bike shop in Mill Valley!
ST: And you run and swim in?
DL: I ran in Asics, but I’m a convert to Brooks Pure Flow, and Brooks is obviously our key shoe sponsor. My wetsuit is a blueseventy Helix.
