This morning’s news section reports the acquisition of a majority stake in Italian shotgun maker Perazzi (Armi Perazzi S.p.A.) by Czechoslovakia’s CSG Group.
CSG made news most recently with their offer to acquire the ammunition businesses Vista Group plans to spin off when it divides the company into what were essentially to be two separate companies.
This latest acquisition brings CSG controlling interest in two formerly family-owned Italian companies: ammunition maker Fiocchi and Perazzi.
Fiocchi is a major ammunition producer, with facilities in Italy and the UK, along with as pair of US facilities in Ozark, Missouri, and Little Rock, Arkansas.
Perazzi, however, is a most-decidedly boutique brand. The prestigious Italian company only produces “around 1,500 units annually”.
Those “units” however, are widely regarded as among the world’s finest shotguns. They’re valued by what Perazzi describes as the world’s “elite hunters” they’re best known for being on the shoulders of many of the world’s finest competition shotgunners. Among them is David Kostelcky, a 2008 Beijing Olympics trap gold medalist. Kostelcky is Czech.
So what motivates a multinational company like CSG to acquire what is a very small company in the overall firearms space? It passes the preliminary tests for any target: from a business standpoint, Perazzi is both stable and prosperous. But there’s another factor: it’s one of the most prestigious brands in the category. As CSG’s owner Michal Strnad explained, the decision was “to strengthen CSG's international prestige and reputation as a global and innovative industrial group expanding in Europe and the USA.”
But I was surprised to learn that CSG didn’t approach Perazzi. The family owned company approached CSG during the Fiocchi acquisition.
So what motivated the Perazzi family to seek an interested buyer? The same things, that cause many family businesses to look to bigger companies. Mauro Perazzi explained (in the CSG announcement) the family decision was driven by three things: desire to ensure a secure future, sustainable growth, and strengthen the company’s unique position in the global luxury arms market.”
Yesterday, I had a conversation with David Blenker, CEO of Fiocchi and CSG Director David Stepan, about this latest acquisition -and CSG’s philosophy of acquisitions. That’s where I learned that this latest acquisition wasn’t one initiated by CSG.
That, Stepan told me, isn’t always the case. “Sometimes,” he said, “we approach companies to see if there’s an interest. This one (Perazzi) was different - and it was important to us because it shows we’re not just about the money.”
While the Perazzi acquisition, was driven by a desire to capitalize on the strengths of two successful family-owned Italian companies, it is also part of a larger global vision for CSG. A vision that looks for growth, but not at the expense of the unique qualities of their various companies.
“We (CSG) directors manage our business divisions separately” Stepan explained, “but we also don’t merge all our companies….. sometimes the uniqueness and the differentiations, it's what it is appealing to the customers.”
Acquisitions around the world by CSG are also a reflection of the fact that there are few purely domestic businesses anymore.
As Stepan pointed out “there are American companies coming to the Czech Republic and exploring the opportunities there. It’s international business; we didn’t start that.”
So why, I asked, the interest in American companies when there are other companies globally that would be open to acquisition?
Stepan’s answer boiled the global firearms industry down to its essentials: “if you want to grow the American market is the only choice you have on your roadmap.”
That is the single biggest reason companies like CSG, CZ, Australia’s NIOA and others look to the United States. If they want to grow their businesses, the United States is literally the only option.
Stepan succinctly summarized the CSG theory: “we respect the local rules, we want to do business - and we want to grow. The American market is the only choice.”
Looking toward their planned acquisition of Vista Outdoors’ ammunition business, Stepan was reluctant to comment due to the fact the deal wasn’t done. But was quick to proudly point to the fact that the two companies vying for Vista’s ammunition business had one thing in common: both were Czech.
“ ..we are a small country from the heart of Europe, 10 million inhabitants,” he said, “And there are two companies, only two companies - from the Czech Republic. There are no Germans, no Koreans, no Swedish companies going for acquisition of one of the largest ammo companies in the United States. So, for that, from that perspective, I'm very proud of it.”
He continued, “you (the US) are also open to foreign investments. When you go abroad, the ambition is basically to go, do the best, you know to do and look for the payback on the investments. You want to widen your footprint, to be a significant player. That’s also our ambition. I don’t think there’s anything extraordinary about that compared to any other international company.”
He’s correct. The goal of any company with any expansion is always simple: to make a return on your investment.
The United States remains the single best opportunity you’ll get - globally- if you’re in the firearms business. It also points out the likelihood that there are other announcements in our future.
As always, we’ll keep you posted.
— Jim Shepherd