SHOCKING FALL FROM GRACE: KKR’s Cycling Investment Turns Into a PR Nightmare!
In a tale that’s equal parts cautionary and dramatic, private equity titan KKR thought it could ride the wave of cycling success during the golden pandemic era. But oh, how the mighty have fallen!
FROM GOLDEN OPPORTUNITY TO DREADFUL DEBT TRAP!
Lockdowns seized Europe in late 2020, and while KKR was anticipating a victory lap after missing out on trendy bike maker Canyon, it settled for the less glamorous Dutch company Accell. At a whopping €1.8 billion, KKR’s bid in January 2022 marked the high point of a deal explosion fueled by cheap cash and sky-high hopes. But WAIT!
By August, just as Accell delisted from the Amsterdam stock exchange, a storm was brewing. Inflation was on the rise, energy costs were through the roof, and consumers were feeling the pinch thanks to Russia’s invasion of Ukraine. The party was OVER!
ACCELL’S DESPERATE STRUGGLE: A GRIM FUTURE AHEAD!
Fast forward to today, and Accell is drowning in debt thanks to a post-pandemic sales meltdown. With cash running dry, the company had no choice but to beg its lenders for a rescue. Last month, a restructuring deal miraculously sliced €600 million off the staggering €1.4 billion debt. But hold your applause! KKR and its partner Teslin had to cough up roughly 20% of their prized shares to the lenders in return for this lifeline. A shocking markdown on KKR’s €1.1 billion investment was unavoidable, proving this venture was a colossal blunder!
WHO’S IN CHARGE NOW? ACCELL FACES A LEADERSHIP CRISIS!
The brains behind this ill-fated deal? Gone! And guess what? Accell is gearing up to welcome its third CEO since KKR took the reins. Will this revolving door ever stop?
This entire saga serves as a HUGE warning sign for private equity firms that dove headfirst into a deal frenzy worth trillions between 2020 and early 2022. Many insiders are whispering that these acquisitions could end up being some of the worst blunders in private equity history!
PANDEMIC BOOM OR BUST? THE MYTH OF ENDLESS DEMAND!
With cycling gaining popularity during lockdowns, 2020 saw Accell’s sales soar by an impressive 17%. But KKR, with its eyes on e-bikes, miscalculated the longevity of this surge. 2022 delivered a nasty surprise: traditional bike sales plummeted 4%, while e-bike growth fell flat due to supply chain chaos and overzealous component ordering!
Accell’s inventory ballooned to a mind-boggling €540 million, setting the stage for a disastrous 2023. Discounting became the norm as revenues nosedived by 10%, and losses skyrocketed to a staggering €330 million.
KKR’S SHAKY REPUTATION AT RISK!
A disgruntled lender couldn’t contain their frustration over KKR’s handling of this investment. It’s “very unusual” for such a distinguished firm to be scrambling for a restructuring just TWO YEARS after snatching a company! Accell’s troubles have turned into a counterpoint to the grand expectations that once surrounded the pandemic era.
With private equity deals facing a reckoning, Accell stands out as an early warning. As the industry grapples with a troubling past and uncertain future, the warning bells are clanging louder than ever! What lies ahead? More amendments, delayed returns, and an unsettling sense that these pandemic-era investments are far from over!
Stay tuned—this ride is just getting started, and the fate of many like Accell hangs in the balance!
photo credit: www.ft.com
