Authentic Brands Group announced Friday that it it has made a binding offer to acquire Boardriders, home to the Quiksilver, Roxy, DC Shoes, RVCA, Billabong, Element and VonZipper brands.
Authentic Founder and CEO Jamie Salter will be the biggest player in the action sports space, so SES thought it would be a good time to review what Jamie has said publicly about his philosophy on the business of brands in the modern world.
In 2021, Jamie Salter flirted with taking Authentic public but changed his mind. In a letter to potential shareholders during that time, however, Salter describes himself as a big believer in brands. But he thinks the old model is broken and that he has found the business model of the future.
New Era of Brand Management
“Before ABG, I worked all over the brand business — founding, managing, operating, wholesaling and retailing brands. I enjoyed a long career on that side of the industry, met a lot of smart people and learned a great deal about how successful brands win.”
“I came to realize that most brands were structured for a different era - before the speed of digital and the complexity of global; antiquated, and ultimately difficult to retool as the market and the consumer evolves.”
“Being best-in-class in every competency at every step of the value chain is an impossible task for most teams, but that’s what defines success in the traditional model. In-source all activities, capital needs, and risk. A vast number of great brands are structured like this.”
“In 2010, I met with my now partners at Leonard Green and told them that a business they knew intimately well, the brand industry, was broken. Over-retailed, burdened by legacy cost and inefficiency, and not equipped to win in the ongoing digital transformation.”
“I pitched the idea of a new breed of brand licensing company. Within the hour, they ‘got it.’” We founded and capitalized ABG and set out to execute on our vision.”
“Asset Light”
Authentic describes its financial model as “asset light” which it says generates a predictable base of recurring revenue, high operating margins and attractive cash flows.
“The vast majority of our license agreements include guaranteed minimum royalties (GMR), which provide a high degree of predictability to our licensing revenue. 83% of our revenue in 2020 was attributable to GMR payments. Beyond the GMRs received from licensees, ABG generates a significant amount of revenue from the collection of overages above the GMR base set for each brand. Our predictable and recurring revenue streams, combined with our attractive margins and minimal capital expenditure requirements, result in high cash flow conversion and increased capacity to invest in future growth initiatives.”
Impressive Roster of Brands
Authentic’s model appears to be working, and the company is acquiring new brands all the time. It’s roster of brands includes: Marilyn Monroe, Elvis Presley, Muhammad Ali, Shaquille O’Neal, David Beckham, Dr. J, Greg Norman, Neil Lane, Thalia, Sports Illustrated, Reebok, Eddie Bauer, Spyder, Volcom, Airwalk, Nautica, Izod, Brooks Brothers, Barneys New York, Judith Leiber, Ted Baker, Hervé Léger, Frye, Juicy Couture, Vince Camuto, Lucky Brand, Aéropostale, Forever 21, Nine West, Jones New York, Tretorn, Prince, Van Heusen, Arrow, Hickey Freeman, Hart Schaffner Marx and Thomasville.
