Top Golfer Agrees Private Equity Deal
By Julie MacIntosh in New York, Financial Times
10/15/09 - Falconhead Capital, a US private equity firm, has struck a deal with golfer Greg Norman to build a company that provides golf cart-mounted global positioning services.
The company is being assembled from a collection of smaller assets.
Falconhead will form GPSI Holdings by merging GPS Industries, ProLink Systems and a separate business that provides GPS services at roughly 60 US golf courses.
Once the deal is completed, GPSI’s combined services will let golfers use electronic screens on their carts to order food and drinks and place their next shots at 970 of the 17,000 golf courses in the US.
The all-equity deal is representative of the types of private equity transactions that are now dominating the still-sluggish market.
These are deals involving little or no debt, but in which buy-out funds aim to make significant operational improvements to companies to generate returns, rather than using financial engineering.
Falconhead, which specialises in sports and leisure investments, said it would control 70 per cent of the newly formed company’s equity, while Mr Norman and the company’s management will own the rest.
GPSI will be run by David Chessler, the current chief executive of Florida-based GPS, whose assets Falconhead is purchasing out of bankruptcy.
A key component of the transaction is an agreement with Ingersoll Rand’s Club Car, one of two well-known golf cart manufacturers, to have its salesforce start pitching GPS systems along with their golf carts, which are starting to be pre-wired to cut down on the costs required to handle GPS technology.
GPSI’s services are currently used by such well-known golf courses as Trump National in Los Angeles, the Doral Resort in Miami, K Club in Ireland and Valderrama in Spain.
GPS Industries filed for bankruptcy protection in August as part of an agreement with Falconhead and Great White Shark Enterprises, Mr Norman’s company, to restructure its balance sheet.
Hall of Fame golfer Mr Norman brought GPS Industries to Falconhead’s attention several years ago as a potential investment.
However, Falconhead only became interested a few months ago when it became clear it could combine the company with ProLink to save sales and marketing costs and spread its research and development budget across a larger scale.
“The companies independently weren’t managed well, and we took advantage of it,” said David Moross, Falconhead’s chief.
“The only way it was going to work as a profitable enterprise was to bring the businesses together.”
Roughly $150m has been invested in GPS Industries, ProLink and the other disparate assets over the past few years, Mr Moross said.
However, Falconhead was able to pull the assets together for a fraction of that cost.