Spyder Active Sports · Prep

The Professor's Questions

David Jacobs founded a high-end ski apparel company in 1978. In 1996, he sought external financing to support further growth of the company and structured a financial deal with CHB Capital Partners, a private equity firm in Denver that began in September, 1997. By 2004, Jacobs was ready to consider alternative types of equity transactions that would provide a source of liquidity to him and his family, including sale of Spyder to another apparel company and sale of a large block of stock to a private equity firm.

How, if at all, does the value of Spyder depend on its ownership structure? What are the (other) primary determinants of value?
Prepare estimates of the company’s value based on DCF and trading and transaction multiples presented in the case. How well do these estimates reflect the considerations for a sale that you believe are most important?
Compare the alternative transactions on the last page of the case. Which one would you choose if you were David Jacobs? Which one would you choose if you were CHB? Who else is affected by your choices and how?

My Answers

Q1. Does value depend on ownership? Other determinants

Yes. Spyder does not have one price. It has a price for each next owner, because the owner changes the cash flows, the people who stay, and the brand that remains. A DCF that ignores ownership is a DCF of a company that may not exist after the closing.

Ownership moves value in four concrete ways.

Who the owner is, changes the cash flows. A strategic buyer (Columbia, VF, Nike, Adidas-Salomon) can put Spyder through its own sourcing and its own stores. That is extra EBITDA the standalone model does not have — a synergy premium. A financial buyer cannot. It pays for the business as it is, plus the governance it will add, minus the extra debt and the 3–5 year exit clock. CHB itself said this in 1997: the CEO who is retiring to France does not care what the PE firm brings; the CEO who will still be there cares what the firm and he can make the company worth in three to five years. In 2004 the question flips: what can the next owner make it worth.
Control is not the same asset as a 37.9% stub. A 100% trade sale or a PE buyout of everyone is a control deal. CHB selling only its minority piece is not. Buyers pay less for stock they cannot steer, cannot take public, and cannot easily resell. The case is explicit: if Jacobs keeps control, CHB's exit shrinks to a minority sale to another PE — the worst version of an already illiquid asset. Add a marketability discount on top of a minority discount.
The people stay, or the forecast dies. Morris's sentence is the whole valuation: Jake and Walbrecht are "the creative engine of that company." Exhibit 5's path — $61M to $166M in four years, EBITDA $9.6M to $27.9M — is a Jake-and-John model. A strategic that folds Spyder into a portfolio and loses them should not pay for that path. A PE that rolls their equity and keeps Jacobs as coach can. The 11.3% option pool is not a rounding error; it is how you keep the engine.
The wrong owner can erase the thing being sold. Jacobs's original bet was "own that little spot at the top." Half of the board's time is already spent keeping channels clean so a $600 jacket at Christy's is not killed by a $300 sale at Gart. A fashion conglomerate that pushes department stores too hard, or a PE that chases the $100M brand with the wrong mix, does not buy Spyder. It buys a brand that used to be Spyder. Hilfiger on the pages of Men's Health was the warning in 1995. Snappleization, from the Nantucket class, is the same movie in a different aisle.

Other primary determinants of value — the ones that sit in the spreadsheet even before you pick an owner:

Growth that just inflected. $10M (1997) → $61.4M (FY04), seven-year CAGR ~30%. Last year +52%. That is rare in technical apparel. Buyers pay for the slope, then argue about whether FY05's +39% is real.
Margin that just appeared. Gross margin 39% → 49.5%; EBITDA 4.9% → 15.6%. Europe going direct, scale, and mix. Trailing sales multiples (~1.1× → $69M) miss this; trailing EBITDA multiples (~10× → $100M) catch it.
The brand, made scarce on purpose. U.S. / Canadian / Austrian teams. Sell-through above the 80% industry average. "Always sell one less jacket than the market demanded." Scarcity is why specialty shops defend it, and why a strategic will overpay.
Seasonality and working-capital violence. June sales $22M, January almost zero; revolver $0 to $23.4M, average $8M. This is why there is no IPO, why a small-company discount belongs in the WACC, and why a buyer with a weak treasury function will stumble.
Market timing. Exhibit 8: trading and deal multiples were crushed in 2000–02 (CHB tried to leave and could not) and are back. "Huge amounts of cash that people wanted to put to work." The window is the buyer's dry powder, not Jacobs's readiness.
Key-person and family risk. Jacobs is 70 and still the conductor. Jake is the product. Walbrecht is the market. Shimokubo is Japan. None of this is diversified.

The short classroom line: ownership is not a footnote on the DCF. It is an input that rewrites the cash flows.

Q2. DCF and multiples; do they capture what matters?

Center of gravity: about $100 million of enterprise value on trailing EBITDA. Sales multiples say ~$70 million. Management's DCF says $170–200 million. I would walk into the room with $90–110 million for a financial buyer and $100–130 million for a strategic, and treat anything built on Exhibit 5's hockey stick as the seller's story, not the buyer's check.

Trading multiples (Exhibit 11, EV ≈ equity market cap + interest-bearing debt)

Company	EV	EV / Sales	EV / EBITDA
Adidas-Salomon	5,761	0.93×	9.8×
Columbia	2,259	2.28×	10.3×
K2	768	0.92×	12.2×
Nike	21,424	1.82×	12.3×
Quiksilver	1,355	1.30×	10.4×
Rossignol	292	0.61×	11.7×
VF Corp.	6,107	1.13×	8.4×
Mean		1.28×	10.7×
Median		1.13×	10.4×

Closest peers for a ski / action-sports brand: Columbia, Quiksilver, K2, Rossignol. Nike / Adidas / VF are too big; Columbia's 2.28× sales is a large-cap, 22% EBITDA-margin luxury this $61M company does not get.

On FY04 sales $61.4M and EBITDA $9.58M:

Median 1.13× sales → EV $69M
Mean 1.28× sales → EV $79M
Median 10.4× EBITDA → EV $100M
Mean 10.7× EBITDA → EV $103M
Columbia 10.3× EBITDA → EV $99M

Transaction multiples (Exhibit 9)

Strategic, drop The North Face (lost money, −2.9× is noise): EBITDA multiples 15.5 / 11.1 / 10.3 / 9.4 / 9.1 → median 10.3×, mean 11.1×. Sales median ~1.1×. Best brand comps are Arc'Teryx (1.1× / 15.5×) and Mountain Hardwear (1.2× / 11.1×).

Financial: 13.3 / 9.3 / 8.9 / 8.2 → median 9.1×, mean 9.9×. Sales ~1.1–1.2× (CamelBak 2.8× is an outlier).

Applied to Spyder:

Strategic 10.3× EBITDA → EV $99M; 11.1× → $106M; Arc'Teryx-style 15.5× → $149M (do not take this unless a buyer has a hole only Spyder fills)
Financial 9.1× → EV $87M; 9.9× → $95M
Either side on sales ~1.1× → EV $67–74M

DCF (Exhibit 5 forecasts)

Unlevered FCF = EBITDA × (1 − t) + t × D&A − Capex − ΔNWC. Tax 35% (U.S. statutory in 2004; the case's own forecast tax rate is ~22–24% after interest, which would raise FCF).

FY	EBITDA	D&A	Capex	ΔNWC	FCF
2005E	13,771	1,078	2,619	1,590	5,119
2006E	16,983	2,097	3,000	929	7,844
2007E	21,777	3,260	3,500	1,292	10,504
2008E	27,895	3,098	4,250	1,459	13,507

WACC ~14% is the honest classroom number: Rf ~4.5%, peer asset beta ~0.8–1.0, size premium 2–3% for a seasonal $61M private company, target D/V ~15–20%. 12% is the generous version (no size premium). Exit at FY08 on 8–10× EBITDA $27.9M.

	12% WACC	14% WACC
8× exit	$169M	~$158M
9× exit	$186M	$174M
10× exit	$204M	~$190M

Worked 12%, 9×: PV of four FCFs ≈ $26.9M; PV of TV $251M / 1.12^4 ≈ $159.4M; EV ≈ $186M. Add ~$4M net cash → equity a little above EV.

Haircut the forecasts 25–30% for execution (28% sales CAGR after a +52% year; engine must stay): EV ~$130–140M.

Do these numbers capture what matters for a sale?

Partly, and the part they miss is the part that will decide the deal.

What they get right:

The EBITDA multiple is the right center. Margin just appeared. A 1.1× sales number ($69M) values Spyder as if it were still the 5–10% EBITDA company of FY01–03. It is not.
The gap between financial ~9× and strategic ~10–11× is exactly the ownership point from Q1: synergies and control on one side, a sponsored hold on the other.
Exhibit 8 says now is a better year to sell than 2002. Multiples are an input, not just an output.

What they miss, and these are the sale considerations I would actually underwrite:

Who stays. No multiple knows if Jake and Walbrecht sign. A $186M DCF that loses them is fiction. A $100M check that keeps them and rolls 11.3% may be the better deal.
Who the buyer is, in the brand sense. Channel integrity, the "one less jacket" scarcity, the race-suit halo. A strategic can pay 11× and destroy the asset; a PE can pay 9× and keep it. Price and value part ways.
Minority vs control. None of the Exhibit 9 deals (except TNF 81% and Helly Hansen 70%) is a 37.9% stub. Applying 10× to CHB's slice without a discount overstates what CHB can get if Jacobs will not sell.
Forecast credibility. Exhibit 5 is the offering memorandum talking. FY04 is unaudited. FAS 133 already showed $1M of noise in FY03–04. Seasonality means one warm winter changes the trailing year. The DCF is a story about a $400M brand; CHB told them to install the ERP for that brand. A buyer will not pay for the ERP's ambition.
Jacobs at 70, CHB's fund clock, two sons, Shimokubo's Japan line. None of this is in WACC. All of it is in the term sheet: rollover, put/call, employment, non-compete, channel covenants, who sits on the board.

Classroom close: use $100M as the number you can defend without blushing; use the DCF as the ceiling you put on the board to keep the auction honest; decide the deal on who owns it next, not on which cell in the spreadsheet is largest.

Q3. Alternative transactions: Jacobs vs CHB, and who else

The last narrative page of the case (p. 12), and the HBS abstract, give three feasible structures. IPO is already dead. I treat these three as the "alternative transactions on the last page."

	A. Trade sale to an apparel company	B. Large block to a new PE firm	C. Jacobs keeps control; CHB sells 37.9%
What is sold	100% (or almost): Jacobs + Shimokubo + CHB + most options	A control or near-control block; Jacobs / Shimokubo sell all or a large share; management rolls	Only CHB's minority
Who owns it Monday	Columbia / VF / Nike / Adidas-type strategic	Another PE + rolled management	Jacobs + Shimokubo still >50%, new PE as the new CHB
Price	Highest: ~10–11× EBITDA, plus synergy. EV ~$100–130M	Mid: ~9×. EV ~$87–110M	Lowest: minority + marketability discount on 37.9%. CHB might see $20–28M, not $38M
Jacobs cash (25.4%)	~$25–33M, then he is done	~$22–28M if he sells most; less if he rolls	Little or none. Wealth still in one stock
CHB (37.9%)	Clean full exit at the high multiple. Fund I is closed	Clean full exit, a turn of multiple lower	Messy, discounted, maybe no buyer
Jake / Walbrecht	Highest "Snapple" risk. Role becomes a transition, or they leave	Highest chance they stay, roll, and become the face	They stay, but the company does not get a new sponsor for the next $100M
Brand	At risk of being a line inside a portfolio	Stays a standalone brand under a new board	Stays Jacobs's, with a new minority partner to train
Time	One closing	One closing, new 3–5 year clock	CHB may wait another year to find a stub buyer

If I were David Jacobs, I choose B — sell a large block to a financial buyer, take most of my 25.4% out in cash, leave Jake and Walbrecht rolled in, keep a thin slice or a board seat only if it comes with a written put.

Why B, not A. He said, at 70, being paid fairly now weighs more than control. A gives him the fattest check. It also puts the company he "so proudly created" inside someone else's assortment, and it puts his sons' careers up for an integration committee. He has already lived A, twice: Lange sold into a larger firm; Jacobs Corp. sold into García, which went bankrupt. He knows how that movie ends for the brand and for the people. B is the 1997 CHB deal run in reverse, with the same logic Kelly used to pitch him: the people who stay, care what the company is worth in three to five years. Jake is 16 years in. Walbrecht is the man who made dealers fly in from Germany. B is how you cash the founder and keep the engine.

Why B, not C. C is the 1995 Jacobs — "never below 50%." That man was 62 and still designing the line. This man has already stepped back, and CHB has already stayed two years past its term. C gives him control he just said he values less, denies him the harvest he said he wants, and leaves his partner stuck. It is also how you fail the next $100M: no new capital, no new governance, a tired founder in the conductor's chair.

The cost of B, said out loud: he is no longer the boss. The new PE will want its own 3–5 year exit. Jake's second bite depends on a sponsor Jacobs does not yet know. Shimokubo's Japan distribution will be renegotiated. He must write down, not shake on: a put on any rollover, employment terms for Jake and John, a channel covenant (specialty vs department), and who can fire the conductor.

If I were CHB, I choose A — a competitive process aimed at a strategic 100% sale — and I keep two or three financial buyers in the process so Jacobs can still land on B without the price collapsing.

CHB's job is not to protect the Jacobs family story. Its job is to return Fund I. Seven years, last remaining deal, target 30%. At $100M equity they have ~8.4× and ~36% IRR; at a strategic $120M they have more; at a minority stub they may fall back toward 30% and still be sitting in the investment. Kelly's own 1997 line works against him here: they do not have control. They cannot force A. So the real CHB move is process, not veto: two banks, a real auction, a clock, and a clear message to Jacobs that C is not a partnership anymore, it is a hostage situation.

I would not die on A if Jacobs refuses to sell himself. A forced minority sale is worse than a slightly cheaper B. B still lets CHB walk out whole. A is the asking price; B is the acceptable close; C is the failure case.

Who else is affected, and how

Jake Jacobs. In A he becomes an employee of a bigger apparel company, or he leaves and the DCF leaves with him. In B he can become the public face, with rolled equity and a real second bite. In C he stays the founder's son, waiting for a succession that has not been named. The 11.3% pool is his leverage; it should be re-cut in B, not cashed out cheap in A.
Bill Jacobs. Smaller seat (Northern California sales). A may delete the region; B / C keep it. Still family wealth, still identity.
John Walbrecht. Not family. A is where "the most driven person you will ever meet" gets a corporate boss. B is where he is the asset. If A is chosen, pay him to stay through one cycle or lose the sell-in.
Shimokubo (25.4%) and Ono Trading. He wants cash like Jacobs. A or B can write him a check and then decide whether Japan stays with Ono. C leaves him illiquid and still the Japan bottleneck.
The rest of the senior team and the option pool. Acceleration vs. new grants. A often accelerates and then cuts. B re-underwrites. C does nothing.
Specialty retailers. They buy Spyder because it is "the real stuff" and because it does not show up at Gart on sale. A buyer who chases department-store volume first will tax this group. Their sell-through is part of the 10×.
The ski teams (U.S., Canada, Austria). A sponsorship is brand equity that a cost-cutting owner can drop in year one. Write it into the deal if you care about the halo.
CHB's LPs, and the next PE's LPs. Clock versus clock. Someone is always on a 3–5 year fuse.
Boulder employees. Culture of a founder-coach versus a portfolio brand. Not sentimental — it is why Walbrecht could spend $150,000 on a sales meeting and have it work.

The one-line map: A maximizes price and maximizes key-person risk. B splits the difference and is the only structure that treats the engine as an asset to be kept. C protects a control Jacobs says he no longer wants, and traps the partner who made the last seven years possible.

Case Summary

David Jacobs founded Spyder in Boulder, Colorado, in 1978. A Canadian downhill champion and national team coach, he had already crashed twice as an entrepreneur: Lange ski boots, after going public, recalled 25,000 pairs over their liners and was eventually sold; Jacobs Corp. sold 45% to venture capitalists and the rest to García, which went bankrupt in 1978. He turned down an offer from Hong Kong's Auyang family to stay on as a vice president and started two more companies of his own, one of which was Spyder: high-end racing sweaters, sold by mail order, made in Hong Kong, positioned with a "powerful, slightly menacing" logo.

The first twenty years are the story of a family workshop growing into a brand. For the first two years it ran out of the family kitchen, with his two teenage sons, Bill and Jake, helping mail out catalogues. To raise money, Jacobs sold stock to Hanson Industries in exchange for $75,000 in cash and a warehouse; when Hanson hit a financial crisis in 1982, he had to either buy it back for $50,000 or lose the company. Having no money of his own, he brought in his Osaka manufacturer, Tsunehisa Shimokubo: Shimokubo put in $50,000 for 50,000 shares, Jacobs took 25,000 shares, and they agreed he would get another 25,000 shares when sales reached $2.5M — he was convinced he had to own at least 50% of any business he was part of. The target was hit in 1986, and the two became 50/50 partners.

The brand claimed that "small spot at the top." Fabrics came from Japan and Switzerland, insulation from 3M, snaps from Italy, and together with suppliers it developed proprietary materials such as X-static, Thermaweb and Spylon. In 1988 it won the U.S. Ski Team sponsorship, and Picabo Street and Tommy Moe appeared at World Cups and Olympics in spiderweb-patterned race suits. Sales grew from $3.4M in 1987 to $7.9M in 1990, and the channel shifted from mail order to specialty ski shops. In Jacobs's words: the market wasn't big, but "if I can hold that small piece at the top, there aren't many people fighting me for it."

Jake represents another life running through this story. International business at the University of Colorado, top honours in fashion design at FIDM, a year at Ono Trading's factory in Japan, then managing production in Hong Kong, before Nike poached him to do apparel development in Singapore and Hong Kong. In 1995 his father called him back as vice president of design and manufacturing.

In 1995 the company hit a midlife crisis. Sales were stuck at $10–15M, Jacobs was nearly 65 and had always kept his money in the company; Tommy Hilfiger, Nautica, Prada and Armani had begun making ski fashion, and Hilfiger ran a two-page ski ad in Men's Health. Jacobs said: "This is my turf." His advisers concluded: either sell the whole company or find a minority partner — "selling 51% is the same as selling everything." In February 1997 he hired Robertson Stephens to take it to market, approaching both strategic and financial buyers; Nike was at one point rumoured to want a majority stake, but it went into skateboarding and hockey instead, and that was that.

CHB Capital Partners is a local Denver PE firm, and its name literally means Closely Held Businesses. Tad Kelly and John Flanigan (both Harvard MBAs), plus Blake Morris. Low volume, high touch: they look at hundreds of deals a year and do only 2–3; they don't buy whole companies but want to "partner" with the CEO; Kelly said equity capital had become as commoditised as debt, so "we have to offer more than money." Their sweet spot: revenue of $10–50M, stakes of 20–80%, holding periods of 3–5 years. They were willing to put in about $5M and take a minority stake, but required a minimum 30% return. After due diligence they felt the projections in the memorandum were high, and proposed a sliding stake based on cumulative 1998–2002 EBITDA: hit the memorandum's $20.5M and they would hold 35%; above $26.5M, it would fall to 25%; below $10.5M, it would rise to 60%. Jacobs rejected the sliding scale and insisted on a fixed percentage. The final deal: on September 25, 1997, CHB first invested $2.5M for convertible preferred stock, a 22% stake; by no later than the end of 1998 it could invest another $2M (of which $1M could have gone to Jacobs and Shimokubo as cash-out, and $1M to working capital). If both tranches were invested, the fully diluted stake would be 37.9%.

Once the money came in, the company was switched over to a different operating system. The board went from "we meet when I'm in Japan and toss a page into the minutes" to formal quarterly meetings, with Kelly and Flanigan joining the board and Morris watching day-to-day operations. CHB pushed them onto J.D. Edwards ERP — "If you want to be a $100M brand, don't install a $10M system, install a $400M one." It cost about $1M. In May 1998 they brought in John Walbrecht, 31–32 years old and from outside the industry (global head of sales and marketing at Dr. Martens, previously at Gloria Vanderbilt and Timberland), as vice president of global sales and marketing. They rolled out fixtures / concept shops, landing 1,500 square feet at Marshall Field in Chicago. Flanigan chaired the annual strategy meeting. At the end of 1998 CHB exercised the second $2M tranche; Jacobs and Shimokubo chose not to take the $1M in cash. Ownership became: CHB 37.9%, employee options 11.3%, Jacobs and Shimokubo 25.4% each.

Growth meant losing money first and making it later. Walbrecht took sales meetings, which under Jacobs had never cost more than $25,000, and turned them into a $150,000 Hollywood-style launch in Vail with 75 dealers invited; the industry's view of the company went from "sleepy little firm" to "player." He himself spent 250 days a year on the road, working out for retailers how to display the merchandise, what music customers should hear and what prices to charge. Blake Morris boiled the industry statistics down to a one-page chart: third in insulated jackets, being crushed by The North Face in shells — and only then did people react. Jake moved his father out of the design seat, expanded the product and buying teams the Nike way, and within 18 months was promoted to vice president of merchandising. Products expanded from tight race suits and the $300–$1,000 core line into Venom, Kyds, Stryke and a snowboard line, with prices reaching down to $100, and distribution into Sports Authority, Dick's and Macy's. In Europe they switched from multiple distributors to selling direct, starting in 2001 with Germany, Australia and Benelux, then France and Switzerland — more profitable on the books. In 2000 the books showed a loss of $972,000 and the bank got nervous; Kelly and Jacobs stripped out the one-off investments, the bank accepted two sets of numbers, "before investment / after investment," and the relationship was saved.

By spring 2004, the report card had turned a page. Net sales went from $27.3M in FY01 to $61.4M in FY04, and net income from $83K to $5.1M. The Canadian and Austrian national teams were added. Retailers valued the high margins and high sell-through; Spyder's principle was "always sell one fewer — one fewer than the market wants." Bill was also called back to run Northern California. CHB tried to exit in 2002, but the market wasn't there; by the end of 2003, this was the only unrealised investment left in one of CHB's funds, held for seven years, longer than the expected 3–5. Jacobs said there was a great deal of cash out there with nowhere to go — "smart money is looking for brands."

They hired two investment banks to split the fees and the responsibilities: Financo (retail) and Wachovia (consumer products, handled by Joe Pellegrini from the 1997 round). An IPO was ruled out: the company was relatively small and highly seasonal. The last page of the case lays out three workable structures: sell to a strategic buyer (an apparel company); sell a large block of equity to another PE firm; or Jacobs keeps control and CHB can only sell its minority stake to another PE firm. Jacobs was 70. He said that in recent years he had stepped back a little from the day-to-day, and that being fairly rewarded for decades of entrepreneurship mattered more to him than continuing to control the company's direction. But Jake and Walbrecht were "the company's creative engine," and an acquisition would rewrite their positions and those of the whole executive team. He had to balance himself, CHB, his two sons, and the company he had built, all at once.

Key Data

Dimension	Figures / facts	Source
Scale	FY04 net sales $61,366K; staff includes the founder's two sons + a full executive team (Exhibit 1)	Text p.1; Exhibit 5
Growth	~$10M in 1997 → $61.4M in FY04, about 29.6% CAGR over seven years; FY03→FY04 +52.3% (40,290→61,366)	Text p.1, p.11; Exhibit 5
Profit	FY04 gross profit $30,355K (49.5%); EBITDA $9,582K (15.6%); net income $5,069K. FY01 gross margin only 39.4%, EBITDA 4.9%	Exhibit 5, own calculations
Projections	FY05–08 sales $85.3 / $105.6 / $133.2 / $165.7M; EBITDA $13.8 / $17.0 / $21.8 / $27.9M; Capex $2.6 / $3.0 / $3.5 / $4.3M; NWC investment $1.6 / $0.9 / $1.3 / $1.5M	Exhibit 5
Balance sheet	FY04 cash $7,975K; other liabilities $3,814K; book equity $6,538K. Working-capital debt averages $8M a month, peaking at $23.4M	Exhibit 6; text p.12
Market and competitors	Core line vs. Prada / Bogner / Arc'Teryx / North Face / Columbia; fashion line vs. Polo / Hilfiger / Nautica; snowboard vs. Burton. Sell-through higher than 80% of the industry	Exhibits 3, 4, 7
Channels	Core and high-end through specialty shops such as Cole Sport and Christy's; mid- and lower-priced through Sports Authority and Dick's; department stores Macy's and Marshall Field (concept shop, 1,500 sq ft)	Exhibit 4; text p.7
Ownership	1997: CHB $2.5M → 22%; 1998 another $2M → 37.9%. 2004: CHB 37.9% / Jacobs 25.4% / Shimokubo 25.4% / options 11.3%	Text p.6, p.8
Rejected terms	Sliding stake: if cumulative EBITDA < $10.5M, CHB gets 60%. Jacobs insisted on a fixed percentage	Text p.5–6
One-off spending	ERP ~$1M; Vail sales meeting $150,000 (previous maximum $25,000); 2000 book loss −$972K	Text p.6, p.8
Comparable transactions	Strategic EV/EBITDA: Arc'Teryx 15.5×, MH 11.1×, Teva 10.3×, Converse 9.4×, Nautica 9.1× (TNF excluded as loss-making); financial: Fila 13.3×, Jack Wolfskin 9.3×, Helly Hansen 8.9×, CamelBak 8.2×	Exhibit 9
Comparable companies	Columbia EV/S 2.28×, EV/EBITDA 10.3×; Quiksilver 1.30× / 10.4×; K2 0.92× / 12.2×; Rossignol 0.61× / 11.7×; VF 1.13× / 8.4×; Nike 1.82× / 12.3×; Adidas 0.93× / 9.8× (EV ≈ equity market value + interest-bearing debt)	Exhibit 11, own calculations
Market timing	Exhibit 8: multiples fell in 2000–02 and recovered in 2003–04; CHB's attempted exit in 2002 failed; in 2004, "lots of cash with nowhere to go"	Exhibit 8; text p.11
Timeline	1978 founded → 1982 Shimokubo → 1988 U.S. team → 1995 Jake returns / plateau → Sept 1997 CHB → 1998 Walbrecht / second tranche → 2001 direct sales in Europe → spring 2004 considering exit	Throughout the text

Calculation notes:

1997 implied equity value: $4.5M / 0.379 ≈ $11.9M (about 1.1× sales at the time).
FY04 net cash: cash $7,975K − other liabilities $3,814K ≈ $4.2M (fiscal year-end is the off-season; the $23.4M debt peak doesn't fall on March 31). Equity value ≈ EV + $4M; for class purposes, equity ≈ EV is a fair approximation.
CHB at $100M equity value: 0.379 × 100 = $37.9M / $4.5M = 8.42×; 8.42^(1/7) − 1 ≈ 36.5% IRR. At $70M equity value: 0.379 × 70 = $26.5M / $4.5M = 5.9×, IRR ≈ 28.9%, right up against their 30% floor.
Jacobs at $100M equity value: 0.254 × 100 = $25.4M in cash (if he exits fully).
Management's projected 2004–08 sales CAGR: 165.7 / 61.4 = 2.70, 2.70^(1/4) − 1 ≈ 28.2% — sustaining high growth after the year that "just took off" within an already very high seven-year historical 29.6% is exactly where a buyer will cut.

Key People

Person	Role	Position / role in the story	Relationships
David Jacobs	Founder, CEO, chairman; 70	Final decision-making power sits with him and Shimokubo (50.8% combined). Wants liquidity; cares less about control than in 1997; still cares about the brand and the next generation	To CHB, a seven-year partner; to Jake / Bill, father and boss
CHB (Kelly / Flanigan / Morris)	Minority shareholder, 37.9%; board; last deal in Fund I	Wants a full exit at the highest possible price. Money is commoditised; what they sell is governance. Not the controlling party, but can force a process	To Jacobs, a friendly minority shareholder; to its LPs, a GP overdue to exit
Tsunehisa Shimokubo	Longtime 50/50 partner, now 25.4%; Japanese distribution via Ono Trading	Wants to cash out; the Japanese channel is tied to him	Interests broadly aligned with Jacobs
Jake Jacobs	VP of merchandising / product; part of the option pool	One of the creative engines. If he stays, the projections hold up; his role is the most uncertain after a strategic acquisition	A succession candidate for his father, not a designated successor
John Walbrecht	VP of global sales and marketing	The other half of the engine. Turned the brand from a product company into a marketing company	Not family; whether he stays depends on whether the new owner wants this engine
Bill Jacobs	Northern California sales	Family member, less influential than Jake	Father / brother
Executive team (Saunders, Stockbauer, de Witte, etc.)	Operations, finance, Europe	11.3% in options; whether they stay and whether vesting accelerates depends on deal structure	Loyal to Jacobs; unknown to a new owner
Financo + Wachovia	Two investment banks	Split fees to run the process; Pellegrini is a familiar face from 1997	Sell-side advisers
Potential strategic buyers	Columbia / VF / Nike / Adidas-Salomon, etc.	Can afford a control premium and synergies, but might also absorb the brand	External bidders
Potential financial buyers	Another PE firm	Want management to stay, roll over equity, and exit again in 3–5 years	External bidders
Specialty shops vs. department stores	Channels	Once channels cross over into discounting, Christy's $600 jacket gets killed by Gart's $300 markdown	External pressure on brand integrity

Who holds decision rights: Jacobs + Shimokubo together hold 50.8%, plus wherever the option pool leans; CHB's 37.9% cannot sell the company on its own. Who put up money: CHB $4.5M, Shimokubo $50K in 1982, Jacobs his entire career. Who is racing the clock: CHB (the fund clock). Where the external pressure comes from: strategic buyers' appetite for synergies, channel leakage, fashion brands like Hilfiger.

Core Tensions

The liquidity / family continuity Jacobs wants and the clean, high-priced exit CHB wants are not the same transaction. A 100% strategic sale usually commands the highest multiple (Exhibit 9 strategic median 10.3× vs. financial 9.1×), and is also the most likely to buy Jake / Walbrecht and the brand's independence along with it. A large-block sale to a financial buyer can keep the engine, give Jacobs his cash, and let CHB exit too, but the price is usually a notch lower. Jacobs keeping control and letting CHB sell only its 37.9% means a minority discount — CHB's least favourite option, but the one that best protects family control, which is exactly what the 70-year-old Jacobs says he no longer cares that much about. This is where the professor's Q3 lands.
The company's value on paper and the company's people are not the same asset. The Exhibit 5 projections assume the engine is still there, the channels are still clean, and Jacobs is still the "conductor / coach." Under a new owner, all three can change. Half of the gap between a DCF of $170–200M and LTM multiples of $70–110M is this assumption.
Holding the small spot at the top and growing into a $100M brand have always been hurting each other. Getting into Macy's, building lower-priced lines and expanding snowboarding are where growth comes from; half of Morris's discussion is "don't damage this or that part of the brand." The wrong next shareholder will pick the wrong side.
Jacobs's life lesson is "never below 50%," and now, for the first time, he says cashing out matters more than control. Lange, García, Hanson — three times he lost his grip; in 1982 and 1997, twice he wrote control into a contract. This time, at 70, if he picks the wrong structure, he will write the third loss into his son's story.
The window is external: in 2004, PE dry powder and multiples are recovering, but CHB's fund is overdue. In 2002 they wanted to leave and couldn't. Now buyers are more eager than sellers — but on the sell side, CHB is more eager than Jacobs.