Weird Monopoly: Football Helmets
Why are football helmets in shortage? Blame a private equity roll-up of the main producers, Schutt and Riddell.
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Football coaches across the country are panicking as the two main corporations who manufacture helmets - Schutt and Riddell - can no longer supply high schools and youth sports leagues.
What happened? One immediate cause was a fire at a supplier of Riddell that makes helmet linings, but there are also standard problems of getting access to materials, aka the ubiquitous ‘supply chain’ problems. These are real enough, but it usually amplifies the problems when firms are owned by financiers, whose main goals are to monopolize an industry or squeeze out short-term cash rather than focusing on operational capacity.
And wouldn’t you know it? It turns out that there’s a private equity roll-up in the space. Riddell is owned by private equity giant Fenway Partners, which has been trying to find a merger strategy for the firm for the last fifteen years. And its rival Schutt is owned by Innovatus Capital Partners, which put out a press release announcing its intent to consolidate the space in 2020 due to the pandemic.
“We believe the sports equipment space is ripe for consolidation. The number of independent operators is shrinking. Those that can weather the storm will emerge stronger and leaner once team sports return in the second half of next year,” said David Schiff, Founding Partner at Innovatus.
Both corporations have been dealing with the legal fall-out from concussions in football. Apparently the new strategy is to be unable to make helmets in the first place. Smart.