By ED TRAVIS
It’s been over eight months since Callaway Golf Company (NYSE: CALY) sold 60 percent of Topgolf (Topgolf, Toptracer, Swing Suites) to a private equity investment firm.
The new owner, private equity investment firm Leonard Green & Partners (LGP), has lots of experience in retail consumer services and among the 80 companies in their portfolio are the largest club management company Troon, Crunch gym and Zaxby’s restaurants.
The $1.1 billion price LGP paid for control reflected the slowing growth of Topgolf as a golf entertainment company since Callaway made the $2.6 billion all-stock purchase in 2020. A fair appraisal of Topgolf would be though it is the biggest operation by far in the golf entertainment business, the spring had gone out of their step and the drive to excel had diminished.
Significantly new CEO David McKillips, formerly with Six Flags Entertainment, has hit the ground running with an insider’s knowledge of retail consumer operations.
McKillips has said Topgolf locations had become too much of a party/social venue and lost the attraction to oncourse golfers. An example of this misconstruing what golfers really want was the use radio ID balls with chips inside to allow shot tracking even though they were the owners of the premier shot tracking Toptracer technology. Given the performance loss of chip-inserted balls both in trajectory and distance it appears to be an easy decision to switch to the more accurate system giving avid golfers a better reading as to what their shots are doing.
This may sound though it’s a small change but if indicative of the new way company leadership is viewing the future it is a major step. Another example is the start of a media network selling access to advertisers on the hitting bay screens. Customers spend an average of two hours in a bay and Topgolf has 28,000 screens in its 103 U.S. locations so this would seem to be an ideal opportunity and revenue source.
McKillips’ goal, which may be very ambitious, is to have 200 domestic locations for Topgolf and while reducing the amount of capital required by moving towards smaller size venues targeting smaller markets plus internationally creating a franchise program to attract regional entertainment investors.
Toptracer has licensing agreements with traditional green-grass driving ranges for their ball-tracking system for a revenue stream separate from Topgolf and the company’s digital simulator Swing Suites division is being packaged as an additional entertainment experience. Also planned at new Topgolf venues are arcade games, outdoor areas with yard games and game day suites
McKillips has gone on record he wants to work towards bringing 10 million new golfers including three million women into the game by 2030 and the company supports programs such as the First Tee and Youth on Course.
This all sounds fine, certainly proactive for Topgolf and the game and given McKillips experience and LGP’s record growing retail consumer brands Topgolf’s future may be very positive. It would be well to remember, however, the end point of this type of private investment deal is to build the acquired company up, increasing revenue and profits and then to sell it often through a public offering.
