Thursday, December 29, 2011

Cervelo For Sale


Full disclosure - I have been a Cervelo friend, fan and owner since almost day-one, so I'll get my biases out of the way right from the get-go.

More neutral and good analysis can be found by long time industry observer and the Publisher of Slowtwitch, Dan Empfield here, as well as on a bike industry blog the Inner Ring, or a good search on Google.

The news on Christmas Eve that Cervelo was seeking a financial partnership with the Dutch company PON, with a possible option to buy, came as a surprise to many - Official News Release. However, for those in the know and for those who know the challenges of growing, and growth in this sort of business it was no real surprise, but an inevitability. Rapid growth, of the kind that Cervelo has experienced over the past 10 years comes at a high cost. While all appears good and great on the surface, great product, impressive sales, and in Cervelo's case winning races, beneath the surface the financial strains can be excessive. Everything, and everyone has a breaking point, and it reaches a point when the principals, realize it's time to move beyond the honeymoon of that post-start-up period. That's the fork in the road where Cervelo is at.

It's been a great ride, for the company that Phil White and Gerard Vroomen founded in the mid 90's as a side-bar to a master's engineering thesis project both were working on together at Montreal's McGill University. They have barely set a pedal wrong along the way. They have been true innovators in bike design and engineering. The bikes have sold extremely well. FWIW, their bikes have won just about all the biggest races in both road racing and triathlon and finally and perhaps most importantly, the Cervelo brand has an extraordinarily dedicated and enthusiastic customer base.

I agree with the other analysis of this that the new financiers, and potential owners, PON would be foolish to somehow toss away all that success.

For White and Vroomen (Note - Vroomen left the day-to-day operations of the company mid-summer, but is still involved with Board of Directors), it can be an emotional process. This is something they founded, started-up and nurtured along. Most companies reach this fork in the road at some point. For a greater insight into how this feels for founders/owners two great reads right in the sporting goods space are: "Raising the Bar" by Clif bar founder Gary Erikson, and "Let My People go Surfing", by Patagonia founder, Yvon Chouinard. In both cases after much deliberation and a few false starts and stops, both Erikson and Chouinard decide to retain the ownership of their companies. There is not a right or wrong with this - it's a highly individual decision based on the situation that the owners/founders find themselves in when they reach that fork in the road.

It sounds very cliche, but to take a company and a business to that next level, whatever that level is, often takes considerably more resources and a very different mind-set than the original owners and founders have. Despite the Erikson and Chouinard stories, walking away can be very hard for the founders, but sometimes that is what is best for the brand. That happens a lot too.

What will happen with Cervelo and PON remains to be seen. The news is still fresh. However, as I said, the folks at PON would be foolish to tamper with what on several key levels has been a highly successful bike company and brand! Cervelo is set to launch in a few weeks the next generation of it's ground-breaking aerodynamic P-series time trial bike - the P5. For the immediate future and on into next year, my guess is that it will be business-as-usual with Cervelo setting precedents and creating good industry buzz, Cervelo bikes selling briskly, and then come the racing season in both triathlon and road racing, Cervelo bikes winning many races!

How do you feel about the potential sale of Cervelo to PON?

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4 comments:

LARRY BRADLEY said...

Great read Steve!

As a patriotic Canadian, it is horrible news to see one of the most successful bike companies sold to foreign interest. Having an industry giant in cycling has definitely helped raise the awareness of the sport in Canada.

I guess we will have to wait and see if the business will remain in our country or if they will relocate based on PON’s strategic vision. I think I can still watch a Cervelo rider with Canadian pride if the bulk of the work is still being done by local talent.

Undies said...

As another Cervelo 'fanboy', i hope that we have the Gary Erickson 'walk and think moment' if a sale is actually likely. That would be far more preferable than getting to a more Phil Knight-like moment where its 'nurses shoes/kids bikes? WTF?? Give me back the helm'
PON does however have, low and mid-priced brands covered so we have to hope that if sold, they keep Cervelo as their bright shining star.

Ironwill said...

Funny. When I lived in The Netherlands I worked for a car part wholesale company, supplying Pon Automobiles (I believe it's the same company). Talking about stuff coming to full circle after buying a new Cervelo last week...

joefrommarathon said...

I'm not an industry guy...just a Cervelo lover since 1999 and have owned 2 PK2 (first one flew off the top of the car in a bike bag) and a P3 from 2004 that i won't give up on. I was blown away by your blog because I never guessed it would be the company for sale.

Cervelo is more famous in my mind than the Habs or the Leafs so I hope the company retains it's association with Canada and that White and Vroomen either hold on to it or remain involved.