The bike industry is always roiling with mergers and acquisitions, but the past In the past year-ish has seen some of the most intense activity in generations. We’ve seen Cannondale (and GT, Schwinn, Mongoose) join Cervelo, Santa Cruz, and Focus under the Pon Holdings umbrella, Cardinal Cycling Group bought Time bikes from Rossignal in early 2021 (Rossignal acquired Time it 2016, and Felt Bicycles in 2017), DT-Swiss picked up boutique disc brake maker Trickstuff, Terry Bicycles was purchased by the owner of Flagg Bicycle Group (putting them in the same family as distributor Quality Bicycle Products, Surly, Salsa, Whisky Components, Wheels Manufacturing, Problem Solvers, 45NRTH and others), titanium stalwarts Merlin and Dean came under new ownership, Vittoria bought A.Dugast tires, and many more.
Today—January 12, 2022—was a particularly busy day for M&A announcements. Kona sold to Kent Outdoors, Detroit Bikes sold to Cardinal (owner of Time), and SRAM picked up Hammerhead, makers of the Karoo 2 GPS cycling computer (one of our Gear of the Year products). SRAM now wholly owns Hammerhead. Previous investors in the company included Lance Armstrong’s venture capital firm NEXT VENTŪRES and professional cyclist Chris Froome.
That last one is, to me, the most interesting. SRAM’s product portfolio is a study in acquisition. Its purchases include: Sachs Bicycle Components (a division of the larger Mannesmann Sachs conglomerate, 1997), RockShox (2002), Truvativ (2004), Avid (2004), Zipp (2007), Quarq (2011), Racermate’s Velotron ergometer (2018), PowerTap (2019), Time pedals (2021), and now Hammerhead (2022).
More and more, the cycling experience—especially on mid- to high-end bikes—is becoming increasingly electrified and app-ified, and few companies exemplify it more than SRAM. The company offers a large selection of electronic shifting drivetrains—Red, Force and Rival AXS on the road and XX1, X01, and GX AXS on the mountain, as well as Force Wide and XPLR parts for gravel—the RockShox Reverb AXS electronic dropper post, a host of power meters (spider based, crank axle based, and pedal based), the Flight Attendant electronically controlled suspension system, the TyreWiz tire pressure monitor, ShockWiz suspension analysis tool, AirWiz suspension pressure monitors (exclusive to Trek right now) the Qollector (a race tracking device), and Velotron ergometer (the Qollector and Velotron appear to mothballed or possibly discontinued).
Many of these electronic components have a companion app—though individual app functions are increasingly rolling into SRAM’s flagship AXS app—which are either necessary to the hardware’s functionality or serve to enhance the user experience. And when you consider the totality of SRAM’s electronic product catalog, a GPS cycling computer with navigation fits right in. Example: A power meter is useless without a computer on the bike to collect and display the information. So, if you’re going to sell someone a power meter, why not also sell them the bit that displays the power meter’s data? Plus, SRAM’s electronic drivetrains already “talk” to a Karoo and there’s obvious potential for connecting the other bits—TyreWiz, Air Wiz, ShockWiz, Reverb AXS, Flight Attendant—to a bike’s computer for data collection, system monitoring, as well as setup and customization.
SRAM can now more tightly integrate its electronic parts and accessories with a cycling computer than it could when the computer was owned by an outside company. They can prioritize the features they want for their parts and roll out coordinated integrations. If SRAM rolls out a 13-speed electronic drivetrain, they don’t have to wait on Hammerhead’s team to get around to shipping an update to make the Karoo compatible. SRAM can coordinate everything in house and blast out a firmware update for the Karoo on the same day the new drivetrains land in stores. This way riders can see their shift data the same day they pick up their fancy new drivetrain. Post ride, all user data gets fed directly to SRAM so they get real time information about users’ riding habits and performance—how many times a rider shifts on a ride, what gears they use, how much power they put out, or how many miles they ride in a week/month/year is helpful for product development—instead of, as it is now, getting all that data filtered through Garmin or Wahoo first.
The last reason I find SRAM’s acquisition of Hammerhead so interesting is because of the gaping hole remaining in SRAM’s product lineup: an e-bike motor. E-bikes are one of the hottest categories in cycling, with most of the industry’s big thinkers expect nothing but growth. With SRAM’s obvious affinity for electronics, you’d think an e-bike motor would be a logical next step for the company. And a display/head unit is almost integral to the e-bike experience. It offers information on assist level, battery status, and remaining range, and can handle tasks like updates, and custom assist profiles. Throw in GPS, mapping, and navigation, and I can see SRAM rolling out features for its potential e-bike motor like a “route me home” function that takes into account elevation changes and remaining battery life to ensure the rider gets home before the bike’s battery dies.
For this to happen, SRAM would need an e-bike motor in its portfolio. But acquiring their way into the e-bike market would be difficult for SRAM. There are already several strong and established players including Brose, Bosch, Mahle, TQ, Bafang, Yamaha, Shimano, Fazua, and Sachs. Fun trivia: That last one has ties to SRAM’s first acquisition. The Sachs motor comes from Germany’s ZF corporation, which acquired what remained of Sachs after SRAM picked up the bicycle division. Most of these established brands are divisions of companies far larger than SRAM, Chinese owned (difficult for a western brand to acquire), or they’re Shimano. There aren’t many small e-bike motor brands for SRAM to pick up, but two potentials would be Fazua or Dyname (they designed the motors for Rocky Mountain’s Powerplay bikes).
I think it’s more likely that SRAM would develop an e-bike motor in house. If you scan over SRAM’s job postings—open positions are among the best tea leaves—there are a lot of positions that, potentially, point to an e-bike motor project. But another possibility I’m entertaining is SRAM skipping on the whole e-bike motor thing because, 1) it’s too late to muscle-in and, 2) more and more bike brands will go the direction of Specialized and develop (either in house or with partners—Specialized partners with Brose on its motors) their own e-bike system in order to have more control of the product.
I do think SRAM’s acquisition of Hammerhead is one more indicator that they’re coming for the e-bike motor market. But even if they don’t go that way, SRAM’s ever increasing portfolio of electronic parts and accessories—a portfolio that will only grow larger—for bicycles makes the Hammerhead a logical next step for a company that practically defines “growth by acquisition.”
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