• Jim

    Well I guess this means that they can stop the pissing contest about who’s bigger. :-)

  • jules

    based purely on the figures quotes in this article, it reads a bit to me as though this may end badly. sure Wiggle’s fundamental operations may be sound – but as stated it is highly leveraged. the move to purchase CRC has hallmarks of the classic get-rich-quick entrepreneur’s tactic of attempting to buy themselves out of a difficult situation through further acquisitions, debt and in the hope of the new acquisition’s success will be larger and absorb the problems of their current/previous position. some notable non-cycling examples are Christopher Skase, Alan Bond…

    by comparison, it seems like CRC has grown more carefully and its fundamentals are (or were) very solid – low debt, high margins. but it now risks going down with the ship if its new owners bring trouble.

    • alexroseinnes

      Steady-on there Jules. That’s an extraordinary leap to Skase and Bond in the space of one sentence.

      • jules

        maybe. but I still reckon it’s problematic. the people who have paid top dollar for Wiggle need it to keep growing at a similar rate to improve their debt position. but just because a brand has experienced strong growth doesn’t guarantee it will continue indefinitely. and there’s a new management team and company structure – i.e. not the one that engineered the great success to date.

        • alexroseinnes

          A company’s debt position isn’t improved through revenue growth, it is improved by expanding margins in better market conditions. One of the ways to do this is to this is to buy a competitor to get stronger pricing power.

          • jules

            there are different ways of improving a company’s financials – debt position, profitability, etc. you can’t reduce it to one thing – like expanding margins. in theory a company like Wiggle could make a whopping 70% profit margin. but if it’s revenue is only $5, that doesn’t mean a lot.

            the strategy for purchasing CRC is most likely 2-fold:
            1. increase pricing power by eliminating competition between retailers (CRC and WIggle) negotiating with suppliers.
            2. reduce operating costs through consolidating operations. (downsizing staff)

            but there’s no guarantee that you’ll achieve those. you can end up getting it wrong and allowing new competitors into the market who steal your market share. and there goes your pricing power. and you can be left with lower sales and high overheads while you struggle to re-structure your operations.

            this is all theory but the risks are very real.

            • alexroseinnes

              “the strategy for purchasing CRC is most likely 2-fold:
              1. increase pricing power by eliminating competition between retailers (CRC and WIggle) negotiating with suppliers.
              2. reduce operating costs through consolidating operations. (downsizing staff)”

              AKA, expanding margins

              • jules

                I was meaning more gross margin, which excludes overheads – but we’re nit picking.

                my point is merely that in such a leveraged position, they need to see those improvements just to balance the books a bit – based on what to me seems like a high debt:profit ration of 82:1. so saying “I expect improvements” to me doesn’t mean much – i.e. if those were factored into the high purchase price.

                anyway, it’s speculation on my part. I’m not claiming to offer an authoritative opinion, even if the longer we go on the more it seems like I’m trying :)

                • alexroseinnes

                  Haha. I’m just neutral until the data says otherwise.

                  On the gross margin thing, this might well improve dramatically from a COGS perspective with respect to inventory pooling. Synergies, baby!

          • Cycling iQ

            The deal, if it proceeds (likely, IMO), may not necessarily result in better pricing for the new entity across the board. CRC and Wiggle may soon be able to compare their costs across shared brands/products, and no doubt will attempt to use combined purchasing power as leverage against smaller brands. I doubt this will apply to a brand like Shimano, for example, which would set a hard floor and not be easily negotiated with – there will be plenty other more profitable channels available.

            At a sourcing level though (ie, producing apparel) I’d imagine the new CRC/Wiggle entity could negotiate better pricing on fabric with its suppliers.

    • George

      Cool your jets, Wiggle looks like every other consumer discretionary business owned by private equity in the history of the world. I guarantee you that Bridgepoint has a greater track record of success in business than some random family from Northern Ireland who have (admittedly) made a pretty good e-com biz.

      • Cycling iQ

        On Bridgepoint’s track record, there’s a reasonable overview (until 2012) here:

      • Brendalmatos2

        ?my .friend’s mate Is getting 98$. HOURLY. on the internet.?….two days ago new McLaren. F1 bought after earning 18,512$,,,this was my previous month’s paycheck ,and-a little over, 17k$ Last month ..3-5 h/r of work a days ..with extra open doors & weekly. paychecks.. it’s realy the easiest work I have ever Do.. I Joined This 7 months ago and now making over 87$, p/h.Learn. More right Here!b447????? http://GlobalSuperEmploymentVacanciesReportsStandardGetPaid/98$hourly…. .?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:::::!b447…

  • Classic growth by acquisition. The only downside will be for competition. Which may lead to higher $

    • jules

      they don’t have a monopoly – nothing like it. it’s relatively easy to set up an online bike store these days and lots of companies are doing it. it’s a very price-sensitive market and I don’t believe they can afford to stop competing on price. they still face strong competition.

      • alexroseinnes

        It’s not easy at all. The supply-chain management and CRM issues are are a huge barrier to entry.

        • jules

          how so? it may not be open to every mum and dad business person, but there are plenty of players out there with experience and know-how. cycling is small in the context of the broader online marketplace.

          • alexroseinnes

            The corporate world is littered with failures where companies thought they had the capital and expertise to enter a new market.

            • jules

              unfortunately for a Wiggle/CRC it only takes 1 to get it right and steal their market share dominance.

              • Sean parker

                I have bought from probikekit, and in the UK so there is already healthy competition. their range seems sometimes larger than wiggle or CRC on some items (saddles for example)

                the german online shops are sometimes good value as well. It is only the US which seems prohibitive (to australia) due to postage costs.

                • Dave

                  Those others are a good example of why this merger should not be allowed. They are competitive because they focus on competing well in some sectors and providing a less impressive service in the more ‘general’ areas covered by the bigger players.

                  Consolidating the areas of overlap will allow ChainWiggle to increase their presence in some of the more specialist sectors of the market.

                  Look at what happens whenever Coles or Woolworths renovates a store. They don’t put in more shelving so they have better economies of scale with selling normal groceries, they increase the areas devoted to fresh food, bread, meats, service deli etc so they can try and squish the local butchers, bakers or fruit and veg places.

                  • Sean parker

                    that’s quite possible, I suppose, but Wiggle/CRC is not a supermarket it is an online store and muscling out a shopfront is completely different to muscling out access to online shopping.

                    When a punter searches for an item they will get a link to whatever shop stocks that item. That’s how I found evans cycles, for example. the ability to assert an online catalogue levels out many of the competitive advantages (but not all) that a large online presence affords. That’s how amazon can coexist with wiggle and and, for that matter, cell bikes in australia.
                    Amazon could never tolerate competition from a LBS if it was a massive storefront chain. yet it sells bike widgets in direct competition to evans cycles in the UK .

                    Wiggle can leverage its economies of scale, for sure, as the article and the letters here suggest, but that does not mean, necessarily, the swallowing of the minnows.

      • ?ack Dennis?n

        In one feel swoop combining their two online traffic figures will give an online UK traffic share of over 50%. Pretty big shift in the market if you ask me.

        • jules

          no doubt about that. but remember – their objective will almost certainly be to rationalise the two businesses, to reduced operational costs. to me, that risks losing some of the points of differentiation between the 2 businesses that allowed them to command so much market share. in other words, if they move under a single banner (just Wiggle) or stay with both brands (keep CRC) but operate too similarly to Wiggle, then I reckon their market share may slip.

  • Sam Young

    Just a typo “…based on the fact EU turnover for both CRC and Wiggle appears well short of the €250 million (AU$500 million) regulatory trigger point in Article 1 of the EC Merger Regulations (ECMR)…”

    250 million euros is more like AUD400million

  • alexroseinnes

    Sensible deal, and consumers will probably do ok. BTW, what is a debt:profit ratio? Where did Cam get his debt data from?

    • jules

      I would suggest it means the owners of Wiggle have paid a fortune for it and put the debt on Wiggle’s books. (i.e. not on themselves as natural persons – which is handy for making a quick exit when things go bad)

      • alexroseinnes

        I think you’ve got a pretty hackneyed view on how private equity works. Still doesn’t answer my question on the debt figures and the spurious ratio.

        • jules

          that’s pretty basic stuff Alex. only a fool takes on the debt personally. I’ve seen it (and even learned the hard way..)

          • alexroseinnes

            I’m not talking about the liability thing, which I understand quite well, thanks, but just your overall tone on the “get-rich-quick” nature of the this and other PE deals.

    • Cycling iQ

      Debt:profit ratio is one way of measuring a business’ leverage and risk. That particular figure, as noted above comes from the Sunday Times’ Top Track 250 league table. It was corroborated against Wiggle’s company accounts, which are freely available from the UK Registrar of Companies.

      • alexroseinnes

        Are you sure you don’t mean debt:equity? Also, it would be great if you could publish the debt figures, rather than just saying it is “large”.

        • Cycling iQ

          The measure used in this article is debt:profit. FY14/15 operating profit was £2.8m on revenue of £179.4. Net debt in the same period was £234.6m. Sunday Times used the lower figure of £226.7m in its league table.

  • George

    This is a very interesting article but is way too light on GAAP for an M&A story.

    • Cycling iQ

      Thanks George. What would you suggest changing, as a balance needs to be struck for the wider audience.

      • George

        A separate far nerdier version with more accounting for the nerds!

        • Cycling iQ

          I like the sound of that.

    • alexroseinnes


  • velocite

    That’s a spectacular difference in profitability between the two companies – it would be interesting to see an analysis of that, but you’d think that the main contributor might be Wiggle’s debt burden. I find the reasons given for the merger quite unconvincing – I don’t see significant economies of scale, and total goodwill might actually decrease: the sum may be less than the parts. I surmise that the driver of this deal, at least in part, might CRC’s owners’ desire to at last cash in – though we have no information it seems on the terms of the ‘merger’.

    I also incline to Jules’s view of Wiggle and its debt.

    • Cycling iQ

      Incidentally, beyond the media releases which Wiggle and CRC issued, neither company is releasing further information about the (yet to be approved) merger. When i contacted Bridgepoint EU for comment, I was informed the only official statements would come from those two companies.

    • Dave

      I agree with your view that the whole thing might be driven by the CRC owners wanting to cash out.

      Running a family-owned company is hard, even with good hired-in management.

      • Nancytfolkes3

        ?my .friend’s mate Is getting 98$. HOURLY. on the internet.?….few days ago new McLaren. F1 bought after earning 18,512$,,,this was my previous month’s paycheck ,and-a little over, 17k$ Last month ..3-5 h/r of work a days ..with extra open doors & weekly. paychecks.. it’s realy the easiest work I have ever Do.. I Joined This 7 months ago and now making over 87$, p/h.Learn. More right Here;b643????? http://GlobalSuperEmploymentVacanciesReportsService/GetPaid/98$hourly…. .?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:?2:::::;b643……

  • Steel

    For a while 2010-2013 I pretty much only researched CRC and Wiggle. The competition has caught up some what, and now it’s worth a few google searches to find prices across the web. The smaller sites struggle to compete on service though as they often don’t stock the same range or have products out of stock. It will take a while for someone to compete against this behemoth.

    What I’m interested in is whether the local importers will move in to compete against the big retailers. I remember buying my C24s off Wiggle and they were 200 squid cheaper than any bike shop could buy them from Shimano and about $400 cheaper than retail prices. Seems that Shimano Australia were getting pooched by Shimano Japan who were dumping through the big UK etailers.

    • Dave

      The increased prices across the retail industry here – commonly called the “Australia Tax” – are nothing to do with “Shimano Australia” and “Shimano Japan” setting different prices or dumping, but purely due to Australia being a small market for bike stuff. It applies across the retail industry, not particularly to cycling.

      Big companies overseas like Shimano don’t like dealing directly in small markets (the overheads are the same as entering a big market) and so they will prefer to deal with a local distributor (or a couple of them) instead. The distributor/s help the international company by taking some of the burdens associated with doing business in Australia, and in return the company licences the local use of the trademark to the distributor. The distributor can then set the wholesale price they charge to the retailers, which will typically be the original price + their costs + ‘insurance’ for unwanted inventory + profit margin (aka protection money).

      The reason the distributors can do this is that they have the brand licence in their back pocket, allowing them to sue retailers which advertise on the basis of stocking Brand XYZ while sourcing goods through a non-authorised supply chain. Unfortunately, even if they weren’t able to sue retailers they would still be able to use FUD (Fear, Uncertainty and Doubt – e.g. “buy from a Brand XYZ Authorised Seller or you won’t know if you’re getting a crappy counterfeit”) to their advantage and comprehensively out-lawyer any attempts to hold them accountable for the use of that tactic.

      The short-term solution to this (for consumers) is simply for people to take their business to other companies which have a more competitive supply chain and are not subject to trademark lawsuits in Australia. This is helped to some extent by the lack of GST on purchases from overseas (which I support, Wiggle/CRC is not just about tax avoidance) but mainly due to the costs+profit of Wiggle being less than the double whammy of costs+profit for both the distributor and the retailer.

      The long term solution is reforming trademark law, to stop it being used to enforce exclusive distribution arrangements. Don’t expect this to be easy, the amount of money to be made from this area is enough to buy influence.

      • jules

        good post Dave but I disagree on brand licences. sure Brand A can licence a retailer to be the ‘authorised re-seller of Brand A bikes’ – but it can’t stop another retailer from selling Brand A bikes. well, the only way it can stop them is by denying them access to purchasing the bikes. but if a retailer can purchase Brand A bikes – say through a 3rd party distributor – without Brand A’s consent, that is perfectly legal. once a manufacturer sells a product in outright terms (which is how you sell bikes, but not software, for example) – then they lose control of it. the buyer (e.g. distributor) has sole rights on how and to whom they may on-sell it, and then the same applies to the next buyer (un-authorised retailer).

        the main reason that I’ve heard that bike retailers continue to deal with exclusive distributors of over-priced wholesale bike components in Australia is just fear of having their supply cut if they try and back-door the distributor, e.g. by sourcing from Wiggle.

        • Dave

          Brand licensing is how the distributors maintain their clout.

          If bypassing the distributors was actually as simple as finding someone overseas willing to sell the stuff, retailers would just do it. Why bother about getting your supply cut off if you’ve already found an alternative supply chain?

          But the fact of the matter is they can’t just do it – even if the brand licensee can’t manage to sue the retailer in the Australian legal system, they’ll get the overseas corp to put pressure on the parallel importer by threatening to cut off their supply.

          I worked in a computer store which lost its alternative supply chain of one particular brand (let’s just say it wasn’t Eastern Analog) to the second method. The distributor tried to get us to buy that stuff from them again once the dust had settled, with their profit margins it would have been insane to try and freeze us out.

          Mizuno took the second path with regards to Wiggle and CRC just last year, successfully getting them to stop selling to Australian customers or face losing their supply.

          • Ross

            Getting off-topic of the original discussion, but this subject (why local LBS don’t/can’t buy from Wiggle etc) has always fascinated me,so how do some other larger LBS’ such as Pushys, Bike Bug and Cell bikes seem to come close and sometimes beat prices of Wiggle etc?

            Maybe Woollies could setup a large bike shop network seeing as how Masters now looks to be dead in the water…it would be awesome to walk into a bike shop that size!

      • Ross

        So would this stop an Australian LBS buying it’s stock (Shimano or other, some or all) from someone like WIggle (rather than direct import from o/s wholesalers/manufacturers which may be cheaper but would be more complicated dealing with customs etc)? This would seem like a good idea for a LBS, better cost price and while still unable to compete with o/s online shops they should be able to do better retail than most other LBS that are still buying through the old current distributor networ and still maintain same or better profit.

        It must be more complicated than this or surely LBS would already be doing it.

        Saying that I do know some that do it on the sly and order an occasional part from CRC etc because the part customer wants is not stocked by normal supplier or out of stock/long delay.

    • Robert Barr

      I think the you are short changing the locals. These days I search the local online stores first as they often have a better range and prices than Wiggle and CRC, and often deliver a lot quicker*.
      As an example if Wiggle Australia is principally a “distributor of Garmin products within Australia” then its not competing with Pushys who have the 520 bundle $10 cheaper at the moment. Similarly MTB direct on Tyres and Clif products often undercuts all the competition.

      * Australia posts occasionally random regional delivery timing excepted.

      • Steel

        Fair point. As I said, I now research more broadly, including the locals. But locals included, I can’t see anyone catching up to CRC+Wiggle any time soon.

  • 2PEAK-support

    impressed by the article and author. very well done!

  • singlespeedscott

    It will be a sad day when they merge. Wiggle’s over extended debt is indicative in their higher prices, slow shipping and poor after sales service. Over the last 16 years CRC has been the go to for my MTB purchases. I suspect all the things I love about CRC will be a thing of the past if this merger goes through. As for road purchases I will stick with Ribble Cycles, Wiggle has never competed with them in regards to price.

  • MadBlack

    Great article. Just what is going to happen to the Australian market if the tax free threshold is dropped from $1,000 to $200 later this year. With the added tax and customs processing costs most of the purchases will be small and people will be forced to look at other options.

    • Dave

      CRC/Wiggle/etc won’t have any Customs processing costs, as they will essentially be registering for GST and applying it at the point of purchase just like a local retailer would. Their packages won’t need to be opened by Customs at the airport for inspection.

      They will still be better on many fronts, due to Australian retailers having to go through middle man distributors. That might enable them to continue being competitive, but not by such huge margins as they have currently.

  • Albert

    Interesting to see what the outcome for Evans, Ribble, Total and Merlin will be – increased market share?

  • Arden

    I hope this merger reinstates the value of products and brands. I also hope it smashes bikebug out of the market and let’s te Australian market settle back into a profitable market for an industry to grow.

  • James

    Interestingly no one has mentioned how Wiggle have just opened their new DC in the Midlands and are only using part of this and that the acquiring of CRC lends it self to the closure and loss of jobs in Northern Ireland when all stock is probably moved over. A central DC in the UK means shipping costs must be less and service for the consumer is maintained
    Do either of these guys actually make any money either. CRC profit has gone backwards and Wiggle haven’t hit the heights they did when Bridgepoint acquired them. I suppose the question is how long will Bridgepoint hold on to them ?


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