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Black Diamond Merger Followup


Submitted by admin on 2010-06-11

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After browsing through climbingnarc I noticed an article on some information which many on rockclimbing will be interested in. By now most of you are aware of the Black Diamond merger with Clarus Corporation, many of you also voiced your opinion, primarily one of disappointment on the original Black Diamond merger article

Though hardly news any more, Backcountry Magazine, at the end of May, discussed the merger in a bit more detail with Black Diamond's ski category director Thomas Laakso, who addressed some of the matters such as public perception of the merger by climbers and the ethics of the Black Diamond.

An extract from the Backcountry article reads as follows:

In discussing the issue with Laakso, he suggested that because the BD Board of Directors will remain virtually the same, co-founder Peter Metcalf's retirement in the distant future would not create a drastic disturbance in the company. While the man at the helm will change, it will not create a new, separate chapter for BD.

Since the merger, online forums, chock full of concerned skiers and climbers predicted abrasively at times a decline in quality, hard goods production and customer care. Most voiced concern over the fact that BD is no longer employee-owned (and therefore no longer skier/climber-owned). Going public potentially indicates that the financial concerns of Wall Street shareholders exceed their interest in the outdoors. But Laakso dismissed any concerns that BD will lose its integrity. "We weren't purchased by a multi-brand conglomerate," he commented. "Our employees, management, ethics of business, what we stand for and support environmentally, and our standards of quality will remain the same."

"This merger gives us additional capital to spend on research and development," said sales representative Tyler Merritt. "Developing BD's recent line of Telemark ski boots required every other project to be put on hold. That will no longer be an issue." With more secure financial support, Black Diamond's future will ideally coincide with the company's roots. In 1989, climber and CEO Peter Metcalf co-founded BD from the bankrupt Chouinard Equipment, one of the pioneers in aid and clean climbing.

You can find the complete article at the Backcountry Magazine site: HERE.


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20 Comments CommentAdd a Comment

 vegastradguy
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 2010-06-11
yeah yeah, thats all standard post-merger PR bullshit- time will tell whether any of it is actually true. the part about not sharing resources with Gregory has to be a lie- otherwise it doesnt make sense to own both companies.
 eastvillage
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 2010-06-11
This guy is obviously a vested employee who stands to make the biggest financial killing by sheer volume.
Fact: As a Wall Street listed company, the pressure for quarterly profits will destroy product quality and/or drive the entire operation to another country.
 fluxus
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 2010-06-11
You know, there is another angle to the story that no one has commented on.

I've been part of the climbing industry for 20+ years and the one thing myself, and many others, have seen time and time again is outsiders coming into the climbing game thinking that they are going to be "the ones" to make climbing pay off, or to bring climbing into the mainstream, or some other big goal. Most of these people suffer horrible failures in 1 - 3 years and get out of climbing all together. The smart ones get beat up a bit, adjust expectations and end up doing o.k. The climbing business, is high overheard, low margin, and generally very challenging.

Experience suggests that this merger is not nearly as threatening to BD as it is to the majority owners of Clarus.

Other than that its very easy for outsiders who know nothing about either company to be cynical because they are idiots with attitudes. Don't get me wrong there are 1,000 different ways for this thing to fail, but the commentary coming from the climbing community on this topic is totally uninformed.
 mtkinji
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 2010-06-11
I think fluxus has some great points.

I understand that businesses are in business to make profits - I don't have a problem with that. Besides, it's not in BD's best interests to move away from the very things that made them the well regarded company that they now are. BD has experienced dramatic success and I'm sure they'd like to stick with that formula, rather than cheaping out their operations
 nivlac
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 2010-06-13
fluxus, I'm surprised you think your commentary is any more informed than "outsiders who know nothing about either company... because they are idiots with attitudes."

What exactly do you know? Are you connected with the c-suite of either company?

I'm uninformed as well, so my opinion is no better than yours. However, when I see a well-funded shell company run by a Wall-Street financier purchase a brand-name company with high overhead, I don't see too many positives.

As you mentioned, this is high-overhead, low margin. The new owner cares about money. That's it. He knows next to nothing about anything else; the brand, the employees, the company's history, that's all subservient to cash.

Experience suggests that an employee may think there's more money to fund R&D. Or maybe experience actually shows that when push comes to shove, cashflow will be diverted to serve the owner's interests. There are many, many examples of company takeovers throughout history that point to a less-than-desirable outcome after a corporate takeover. This merger is very threatening to BD if it doesn't work out for Clarus. And the definition of "working out for Clarus" may surprise the commentators who think BD will always fight the good fight and never let down their employees, brand and customers. Everyone is right to be wary, even cynical.

This reverse merger issue is also moot. Reverse mergers are done for legal and tax purposes, not because there was some intent to keep the BD name. You can merge any way you wish and change the name to whatever you wish at any time.

@mtkinji - you're misinterpreting this merger. BD's best interests are no longer applicable; it is Clarus's best interests that now matter and they are no longer necessarily in line with BD's former employee-owners, especially if they run into a rough quarter or two.
 fluxus
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 2010-06-14
Nivlac,

You surprise easily. Just because I'm on RC.com doesn't mean I'm a noob. What part of the phrase "I've been part of the climbing industry for 20+ years" don't you understand? Of course I know people who are participating in this deal and have talked to them since it happened. I was also sponsored by BD for a number of years, and as a sponsored climber did product testing, and had some involvement with R&D, and saw the workings of BD on a weekly basis.

"However, when I see a well-funded shell company run by a Wall-Street financier purchase a brand-name company with high overhead, I don't see too many positives."

That's right these guys stand to loose their money as I already stated.

"As you mentioned, this is high-overhead, low margin. The new owner cares about money. That's it. He knows next to nothing about anything else; the brand, the employees, the company's history, that's all subservient to cash. "

This is not really counter to anything I wrote above. As I already stated the track record of outsiders coming to the climbing industry is not very good. I have personally known and worked with/for (and closely observed other) outsiders who succeeded and others who failed in climbing. Having the wrong values, expectations, and understandings of the outdoor industry and its potentials is part of a number of failures. That's why it makes a great deal of sense for Clarus to partner with Peter and the rest of the BD crew. If all they can see or understand is cash, I am not sure why they would enter into the outdoor biz in the first place, its a highly competitive, price sensitive and essentially saturated market. As the joke goes: How do you make a small fortune in the climbing biz? Start with a large one.

Here is the thing, if the deal fails as other deals have, there is a pattern. The outsiders realize that they don't want to be in the climbing business and sell their interest in the company either back to the climbers inside the company or to another climbing entity.

In this case though, I don't think for a minute that the new money wants to keep BD as just a climbing company, Look forward to expansions into related areas of the outdoor market. Frankly despite BD's very real excellence in climbing R&D and their long term commitment to climbing, there are better ways to make money in the outdoor industry and BD should probably be going that route, regardless of who funds it.

 nivlac
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 2010-06-14
I suppose I do surprise easily. Next time I won't give you the benefit of the doubt. What I am concerned with, and what you seem to ignore, is the potential for Clarus to strip BD of its funding and its commitment and culture of R&D excellence when the going gets rough. You seem to fail to understand or are actively ignoring the danger to BD if the market gets difficult.

If Clarus gets bloodied, I doubt they will just sell the company back to BD and its employees without taking adverse action. I'm concerned they'll suck BD dry and leave a barely working husk to sell. In the meantime, buyers of BD products will have to have real concerns about the quality of those products.

One of the things I'll be watching for is personnel turnover and changes in BD culture.

Oh, but I'm sure you anticipated all of what I said because you've been talking to BD and its executives. Your ignorant "I was sponsored by BD; ergo, I know what's going on with Clarus" assertion is a pathetic excuse for claiming to understand how this merger may turn out when times turn tough. You may say you're not a noob, but you sure fooled me.
 kjaking
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 2010-06-14
3 out of 5 stars "Look forward to expansions into related areas of the outdoor market."

Surely you meant to say "fear" expansion into "unrelated" areas of the outdoor market. This probably means more clothing, less climbing. Its already bad enough how few quality options there are for climbing hardware, and who really needs another puffy jacket option?
 fluxus
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 2010-06-14
nivlac,

Wow, I gotta say you are raising the "I'm a bigger ass hole than you are" bar to a very high level. Nevertheless, are you actually reading my words or are you just looking from someone to be pissy with? I'm not ignoring or ignorant of anything you accuse me of. Try reading the posts son.

On a more real note, what funding do you think Clarus is going to strip BD of? How much money do you think is actually in this deal? BD is a pretty small company for guys who have previously worked on projects worth figures in the low billions. In essence what you are saying your are afraid of is Clarus committing suicide for numbers in the low millions. Keep in mind they were sitting on 81 million in cash according to their SEC filings. They could invest that cash in obvious ways and get as good of a return without the same potential for a big mess that is hard to extract ones self from. Of course all the negatives that people are stating in these threads could very well happen, and I've already noted the well established pattern of outsiders coming into climbing and getting their hats handed to them. But what I am reacting most strongly to is the defacto insistence that Peter Metcalf is some sort of moron who doesn't know what he is getting into or understand the potential risk to BD. That just won't fly with anyone who actually knows the man and the rest of the company. Please name one person who has more skill at running a climbing company and who understands the outdoor market better than Peter and many long time owner / employes of BD such as Russ Clune, Chris Gover, or Jonny woodward. Do you think you are smarter or more knowledgeable then they are? Just say the words: "I know more about this deal and the outdoor industry than Metcalf does"

Also note, I said I know BD as a company, I don't know Clarus. In any case its time for you to put up or shut up. What first hand knowledge do you have of either company in this deal? During the time I was sponsored by BD I was in their offices about 3 times a week, knew most of the employes, and had pretty open access to all departments of the company, I saw the entire process of designing products and bringing them to market first hand. And as I already said I have discussed the Clarus deal with owners (two of them) of the company. SO Before you call me ignorant you better have had more than 7 years experience looking at Clarus or BD from the inside as well as 20 year relationships with ownership. If not, it time for you to shut you cake hole. OR you can come clean and tell us what you actually know. Otherwise you are just another blow hard.

kjaking- While more clothing, less climbing is not impossible. I had that conversation with BD years ago. At the time I was hoping they would do more with clothing because I loved the designs that they did have, and because they made me a really great one of a kind jacket that I loved. Anyway the answer I got was "No way!" They didn't want to be in the clothing business because of the nature of the clothing business. Interestingly the one company I know that is heading exactly into the "puffy jacket" market right now is doing so based on price, their line is going to cost less than half of what folks like the North Face ask while being a similar product, but there are not a lot of clothing items for which that is possible.

You guys can sell all the fear you want, and keep insisting that the sky is falling all you want. indeed this deal could end badly. I for one have never questioned that potential, but I'm willing to wait and see. Keep in mind there is some slim chance that the deal *might* have an up side. I know, that's crazy talk. anyway If it does go badly, BD will most likely survive, beat up, weary, and smaller but there will be climbers interested in rebuilding it.

By the way, how many of you jokers know how / why BD came into existence in the first place?
 nivlac
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 2010-06-15
fluxus,

Two more points. One, although I respectfully think you should grow a thicker skin, I'll apologize if I came across too harshly.

Two, I still think you're not getting my main point. I'm not disagreeing with any of your points, just wondering why you're not seeing the possibility of mine.

I don't know Metcalf personally, and I never claimed to. You were the name dropper, not me. And, more importantly, nobody knows Clarus's mind. Only time will tell how this turns out.

Finally, I do hope for the best for BD and its employees, because I really like their products. Let's hope the better scenario plays out.
 chugach001
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 2010-06-15
Ah come on, Metcalf risked it all and busted his ass for 20 years. He's earned the right to cash in his chips and leave the table.

If you wanted the business to remain so damn pure you would have bought it yourself. But likely you are all talk and no cash. The petulant child who wants to believe in fairies and unicorns.

There is way too much risk in business to stay in it any longer than you want. This is like telling Bridwell he's a sellout for tapering back first ascents in his old age. Whothefuckareyou to sit in the bleachers and chastise the warrior who gave so much for so long? You cant even carry his jockstrap and you want to cast stones. Go risk your own fortune and you'll be ashamed of how you once acted as a child.

Harrumph!!!


 cchildre
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 2010-06-16
This business is simple. Investors see an enduring company with a dedicated client list who has rigorous demands for quality. (Don't think the CCH melt down has not been factored into this equation) Once acquired, BD can go up or down. Short-term, to achieve a quick return, they could cut cost, lower quality, and milk it for profits to sell the shell (unlikely knowing the associated cost for such a shift would have to be absorbed). The more intelligent route, is to nurture and develop the company, increase efficiency, and maximize their bottom line aimed at long-term success.

Consider that, most of the buy, loot, and sell-off type companies tend to target businesses that have a depressed value, expensive manufacturing equipment or capital, excessively overpaid management, and are in a more volatile line of business.
 ClimbSoHigh
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 2010-06-17
"But Laakso dismissed any concerns that BD will lose its integrity."

Has anyone heard of a corperate exec say "this merger WILL diminish quality and integrity" even though 80% of the time it does? I love how they try to reasure everyone nothing will change. When panasonic was bought out by a Chinese company, they said nothing would change but it did. Execs will have one finger on the liquidate button while telling everyone how things are not going to change. I'll trust a murderer before I trust a ceo or corperate executive.
 --ross
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 2010-06-23
I hope the products improve.
--
 theguy
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 2010-06-25
Black Diamond's European sales manager [url "http://www.blackdiamondequipment.com/en-us/journal/climb/all/winger-for-the-weekend-50"]beautifully captures[/url] the extreme lack of boldness, not to say derivativeness, which many had feared from BD post-merger in its remake of the original Monty Python sidewalk climbing video; or perhaps the disgrace of the French football team is symptomatic of a more broad-spread fault in the national character.

Also, it's impossible to find archived QC Lab features on the BD website now, since they're all mixed in with the other blog entries; not sure whether this is pre- or post-merger.
 dynosore
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 2010-07-07
Merger = bean counters looking for ways to cut costs. Maybe they'll be the exception, but I'd look for BD to focus on branding and selling clothes etc. more, and hardware will be neglected. Hope I'm wrong, but if I had to bet......
 ajkclay
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 2010-07-13
Conspiracy theories are cool, but how about some evidence based discussion...

Has there been any real evidence of a significant decline in quality of BD products or service since the merger? Real mind you, not anecdotal; so something like: UIAA tests have indicated a problem with (x); and not, well this friend of mine bought a stopper and it had a scratch on it.

"The sky is falling, the sky is falling!"

Sure Henny Penny, maybe I'll have a look for myself. The BD equipment I have purchsed recently seems to work ok.

Cheers

Adam

PS what chugach001 said :)
 sosure
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 2010-08-04
A somewhat less demure version of Kanders:

http://videosift.com/video/Colbert-Report-8-2-10-Alpha-Dog-David-H-Brooks
 bighavoc
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 2010-08-26
The only thing I'll say is that I will not be buying any new BD products that are made in China. With my life on the line, no thank you. With other options available, something tells me others will move away from BD too. Personally, I'm not waiting for evidence of a decline in quality; sounds disasterous.
 give_r
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 2010-09-06
To bring a paralleling anecdote into the picture. I work for an industrial rope access company that was recently bought by a large corporate management company. Previous to the merger everyone saw only good in this deal and really if you're invested the company at all as an employee its easy to get taken with that kind of deal while its happening. In the single year that has past since then, working for the company has become intolerable and many of the quality workers that made the company what it is have jumped ship to work for other companies.

Just to bring into perspective what this kind of thing feels like from the inside of the company as it happens. You lose faith and you stop identifying with the company you work for.

I'm on team dooms-day for this one.

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