The fate of Savage arms!

[JO JO]

Bean counters are Bean counters at the end of the day , vista has many companies i wonder what happens to them as well like bushnell,hoppes,and
RCBS to name a few are all Vista gun related products,

 

[NIGHTLORD40K]

I get that. It just frustrating that all these great companies like Remington, Marlin, Slick trick broad heads, etc. get purchased by places such as Vista who put their hand in 30 different cookie jars and when one of those cookie jars starts becoming empty and nothing but crumbs left they move onto the next jar and eat all those cookies and so forth. Doing this leaves those employees wondering where their next cookie is going to come from or worse letting them all go like freedom did with Marlin and move shop somewhere else to cut cost.

I've seen so many companies around me that were once very good places to work purchased by larger corporations that had their hand in everything only to milk the once booming company dry and when there's no more milk they move onto the next cash cow and leave families wondering where their next jar of cookies is going to come from.

Man i want some Oreos and Milk now!!

It also had a great deal to do with when the founder and his family have all died off or left the business. Yes, they wanted to make a living, but Colt, Ruger, Savage, etc. first and foremost had a passion for firearms design. Not to mention that quality and reputation are a concern when its YOUR name on the building, lol.

Once the family is out of the picture, CEOs are only concerned about hitting the numbers necessary to trigger their next bonus, knowing darn well they won't be around in a couple years and the board members only have to listen to the shareholders.....not the customers.

 

[Nature Boy]

I've seen so many companies around me that were once very good places to work purchased by larger corporations that had their hand in everything only to milk the once booming company dry and when there's no more milk they move onto the next cash cow

That's not a good model for acquiring companies and generally not how it works.

If the acquired company is truly a "booming" thriving business, the price to purchase it will reflect that and will carry a premium several multiples higher than it's last 12 months trailing earnings. Generally, for the acquiring company to get a return on their investment they must improve the acquired business in ways that include a combination of eliminating inefficiency and growing top line revenue. Milking cash won't cut it.

 

[someguy2800]

Sometimes companies will get bought because the sum of there assets and cash on hand is higher than there stock valuation. Say if they have 10 million in fixed assets, they have 8 million in cash, and the stock valuation is only 12 million, someone will buy it, take the cash, and resell the business. That's why you often see really fast growing public companies start acquiring other companies, often that don't really seam to fit with there business model. They are trying to get rid of there cash on hand so they don't become a target of acquisition themselves. Anyway I doubt that's happening much in the firearms industry, its generally a pretty low margin business.

 

[Blkhrt13]

I know this much I was looking at vista outdoors to see what products I won’t buy anymore. Dang that’s a lot of stuff.

 

[Demi-human]

so they don't become a target of acquisition themselves.

Are they unable to say "No."?
If some entity wanted to buy my eighteen dollar business for twelve dollars, to then sell it for ten, I would tell them, No.

Sigh. Business makes my brain hurt.
Let's stoichiometrically balance biological processes instead. Like fermentation.
Yeah, wait...beer. Let's drink instead! That almost never makes my brain hurt!

 

[WestKentucky]

It would be nice if Taurus USA could aquire Savage. They are aligned with the low price mentality that Savage has had for years, and taurus does have a good (albeit terribly slow) customer service system. Since Rossi is on the fritz for importation maybe they could move production (frame finishing and assembly) of some of the r92 rifles here in a savage facility and double down on long guns. The only notable absence from Taurus affiliated companies is in shotguns, where Stevens has a history and a name for value...hmmm

 

[Axis II]

I know this much I was looking at vista outdoors to see what products I won’t buy anymore. Dang that’s a lot of stuff.

I don't own half that crap anyways because its too expensive or junk. Butler creek caps is the only thing on my list and even those went down hill over the years.

 

[jmr40]

Winchester, Smith & Wesson, Remington, Colt, Marlin, Charter Arms, Browning, and a few other gun companies have been bought and sold multiple times in my lifetime. They are still making guns but some are in better shape than others. Savage has a loyal following and I'd expect the company to continue in much the same direction. Sure, there will likely be changes, but I don't expect anything dramatic.

 

[somethingbenign]

Are they unable to say "No."?
If some entity wanted to buy my eighteen dollar business for twelve dollars, to then sell it for ten, I would tell them, No.

Sigh. Business makes my brain hurt.
Let's stoichiometrically balance biological processes instead. Like fermentation.
Yeah, wait...beer. Let's drink instead! That almost never makes my brain hurt!

The way I understand it this is only a problem if the company is publicly traded on the stock market. You will often see companies keep more than half the stock in the original public offering so they can retain control. If this was possible for companies that aren't publicly traded that would be like someone buying my house from under me because I still have a loan out. I'm sure there is some legal wizardry that could make it possible but I'd rather not think on that too much. Dang now I want beer too.

 

[someguy2800]

Are they unable to say "No."?
If some entity wanted to buy my eighteen dollar business for twelve dollars, to then sell it for ten, I would tell them, No.

Sigh. Business makes my brain hurt.
Let's stoichiometrically balance biological processes instead. Like fermentation.
Yeah, wait...beer. Let's drink instead! That almost never makes my brain hurt!

This would only apply to publicly traded companies.

 

[Charlie98]

That article doesn't really make any sense. One of Savage's problems is they are giving away their rifles for cheap... it's hard to make a profit with that business model. Another item that is hurting the firearms industry as a whole is the market itself is oversaturated... the last 10 years saw huge sales increases as everyone knee-jerked over shootings and such, the market is simply over supplied right now, any person who has a reasonable understanding of supply and demand knows sales had to hit a stop.

 

[Fine Figure of a Man]

supply and demand

Yes Sir, one of the great things about capitalism is when there is a demand there will be a supply.
I have and like Savage rifles. I'm a customer, I pay for products with money not loyalty. The fate of Savage as a company doesn't concern me a bit. If they go belly up someone else will step in with equal or better products.

 

[hdwhit]

Demi-Human asked:
Are they unable to say "No."?
If some entity wanted to buy my eighteen dollar business for twelve dollars, to then sell it for ten, I would tell them, No.

In a word, No.

Don't confuse the ownership of a sole-proprietorship business with the ownership of a corporation. Whether privately held or publicly traded, the ownership of a corporation is determined based on the ownership of the stock. You may be Founder, President and CEO of a corporation, but if I own more than 50% of the outstanding stock, I, not you, own the corporation. And if someone else comes along and buys that stock from me, the Founder, President and CEO has little say in the transaction.

 

[ilbob]

Bean counters are Bean counters at the end of the day , vista has many companies i wonder what happens to them as well like bushnell,hoppes,and
RCBS to name a few are all Vista gun related products,

The bean counters are what keep companies from going under by making sure the owners have good information about what is really going on. It is sad when a business comes to the end of its life, but it is part of the life cycle of everything to eventually die. There are very few companies that survive more than 100 years.

You also have to protect the business from parts of itself that are not doing as well or that part of the business will eventually destroy the profitable parts.

 

[Varminterror]

Are they unable to say "No."?
If some entity wanted to buy my eighteen dollar business for twelve dollars, to then sell it for ten, I would tell them, No.

Sigh. Business makes my brain hurt.
Let's stoichiometrically balance biological processes instead. Like fermentation.
Yeah, wait...beer. Let's drink instead! That almost never makes my brain hurt!

Your synopsis of @someguy2800’s model is incorrect - it’s NOT an 18 million dollar company, it’s a 12 million dollar company which is holding $18 million in cash and assets - THAT is what makes it a good buy. So when it has a $12m valuation, if someone makes a bid on it at $14m, the standing board would be foolish to not take it, as their internal hurdle at 16% IRR is only $13.9m. So the selling company makes their return target in the blink of an eye. Alternatively then, the buying company buys it at $14m, absorbs the $8m in cash, sells it at $10m, so they take home a net value of $18m on a $14m deal - again, a 16% IRR puts their hurdle at $16.2m, so they too are well ahead of their business target. Reminding here, that business hadn’t significantly changed in its products or services, so it’s valuation may not dip much below that original $12m even if it gets the cash drained - as it remains to hold $10m in asset value.

You don’t have to like it for it to be real for the world in which you live. The goal in any business management company - and ALL strategic boards for public companies share that same business management responsibility - is to make money. If you can make money by making and selling your products, great. If you make money by providing services, great. If you make your money by making strategic business acquisitions and divestments, great. That’s your job as a strategic business leader. In a “cash claim” game like we’re describing, it’s the duty of the purchasing company to evaluate the business for the merit of the business, so whoever buys that company at $10m gets the burden of making its IRR through product sales. It’s a good buy if they have good margins, as they’d be buying the company at its current asset value, assuming they have means to hit their 16% IRR hurdle through income/sales margin. In that case, give it a couple years to rebuild that cash on hand (under 5yrs), assuming their reinvestment in capital balances out their asset depreciation, and they would be EXACTLY back in the same position; $10m asset value, $8m cash on hand, and again, the company valuation likely wouldn’t grow much, since they didn’t increase asset value, meaning they basically kept the lights on, rather than sinking cash into investments which would materially increase their stock valuation - so they’d be worth that same $12m... no change in valuation, but an $8m cash grab, a $1.9m sellout grab, and an $8m cash growth - with a looming $1.9m sellout grab in its future... no change in value, but about twice the company valuation, about $20m, gained by 4 parties through acquisition and divestment...

 

[alcesgigas]

Let's see now: guns are things, vehicles are things--so too are hammers, computers, and cell phones. I haven't a doubt that they'll come a day--say when the drama queens of today get our age--that they'll be faced with their own repast--and they'll learn that not just guns, but all things, having minds of their own, can awaken with thoughts of murder and mayhem just as those guns of yesteryear. Sad to say it'll be too little too late. Just think computers and cell phones, in the hands of miscreants making mischief, are far more dangerous--that's right way far--than any gun ever made. When are we going to accept that living with the freedoms we have mandates a plethora of tolerances. Without one there's not the other. We need to stop blaming things for what people do. This post just infuriated me. We need more guns not less; common sense tells us that when the smoke clears it'll be a new day and people will know that Americans--all Americans--can and will shoot back. One could get hurt.

Freedom Arms? This must be a misprint; aren't they the folks that build the 454 Casull wheelgun? They didn't turn funny did they? Remington, Savage; who's next and what to do...

 

[Charlie98]

Yes Sir, one of the great things about capitalism is when there is a demand there will be a supply.

Well... yes and no. The supply was not initially there, particularly with ammunition and reloading components; but since the demand was so strong, everyone and their brother started making guns and ammunition, eventually the supply crested demand... and now we have a glut of firearms and ammunition. I often wonder what the market would be like today, a year into a Hillary presidency; me thinks we probably wouldn't be seeing what we are today, assuming they weren't regulated outright.

 

[Demi-human]

You don’t have to like it for it to be real for the world in which you live.

Agreed. This has less influence in my life than the alignment of the planets, or perhaps sneezing Amazonian butterflies. I do thank you for the explanation though.

I am of the sort to.

sinking cash into investments which would materially increase their stock valuation

Pressing forward technology and all that.

I have been told Idealists make terrible businessmen. More than once...

 

[Varminterror]

Freedom Arms? This must be a misprint; aren't they the folks that build the 454 Casull wheelgun? They didn't turn funny did they? Remington, Savage; who's next and what to do...

Freedom Group is not Freedom Arms. Freedom Group is the operating company for Cerberus management, an investment group. Freedom Group is now called Remington Outdoors company. This is the group who owns Remington, Bushmaster, DPMS, etc. Not the Freedom Arms which produces revolvers.

 

[Varminterror]

Pressing forward technology and all that.

I have been told Idealists make terrible businessmen. More than once...

I’ve heard the same, but honestly, as long as the Idealist has a lot of pragmatists and realists in his strategic operations group, the Idealist can make a fantastic businessman, as they tend to push for high innovation initiatives and a foundation of customer satisfaction and service. It’s companies WITHOUT an idealist in their leadership who suffer.