National Paintball Supply (NPS) and Pursuit Marketing, Inc. (PMI) have been bitter competitors almost from the time both companies hit the market.   Both worked to sponsor the highest level teams, out-do each other in marketing and hype, and undercut each other on pricing in the all-important war to gain market share.

Now that matchmaker Angelo, Gordon and Company, an investment firm based in New York, New York has come along and put the two companies together, what does it mean to the rest of the industry and the sport itself?

Back in Time

I got a good laugh out of several emails I got from industry and sport insiders who claimed they knew about this 'combining' months ago.  The story actually started over a year ago, when rumors started circulating that NPS was going to try and buy out PMI, in order to gain a capability for manufacturing paint.  Paintballs are the coin of the realm in the paintball world, a gateway to opportunities to make money in other ventures.  Think of it in the terms of a convenience store:  A local stop-and-rob doesn't make much in the way of profit on selling gasoline, but it gives customers a reason to be at their store, and the idea is to get customers inside to buy pop, smokes, jerky, or taquitos, which have a MUCH higher profit margin.  So it is with paint.  Distributing paint doesn't have much in the way of markup at the wholesale level, but having paint that everyone wants gives a distributor a chance to get customers in the door to buy other products like markers, accessories, and the like which has a MUCH higher markup than paint does.

At the time the rumors started circulating about NPS buying out PMI, NPS was involved with ProCaps, buying huge volumes of paint to resell to their wholesale and retail customers.  The relationship was marred with lawsuits, late payments, and general unpleasantness.  Some of the lawsuits are still ongoing, and have been reported upon here.  Quite the uproar was given when the story was posted that NPS would try and buy out PMI, which was having difficulties of their own, servicing debt to Cardinal Health, who had previously owned RP Scherer, which PMI bought.  At one point the rumor got so strong, and evidence was mounting to indicate that the buyout might happen that NPS went so far as to issue a statement that they were indeed talking to PMI, but at that point nothing had happened.  Rumor and speculation later postulated that the deal had fallen though, for reasons unknown.  In the meantime, ProCaps had terminated their contract with NPS due to claims of non-payment, sparking a rather luridly written cause for action from NPS, which leaked to the paintball press and was widely distributed.  At this writing the case is currently bogged down in New Jersey Federal Court in procedural motions.

Here and Now

Late this summer sources started indicating to me that an investment firm was looking into buying into the paintball market in a big way.  This came as no shock, since major investment firms had already bought into the sport big time, such as Imperial Capital Corporation buying a significant stake in ProCaps, Summit Partners buying Tippmann outright, and K2 Corporation buying Brass Eagle, VL, JT, and WGP.  

Further investigation developed information that New York-based Angelo, Gordon and Company was looking to buy NPS and PMI.  In a phone call to an individual deep inside the NPS camp, I was told the information I had "Wasn't wrong".  This individual wouldn't elaborate any further, but the partial confirmation that I was on the right track fueled the search for more information.  Angelo, Gordon and Company has a website, www.angelogordon.com that details their key people, what they do, and their expertise in doing it.  Angelo, Gordon has a division that deals in buying 'distressed' companies, bringing in their own experts, rebuilding the companies involved to profitability, then reselling the company for a massive profit.  Given that Angelo, Gordon has a capital fund valued at anywhere from 10 to 13 billion dollars, it'd be fair to assume they're good at what they do.

Then on November 17th, the 'official' announcement was made that the two companies had been bought in separate deals by Angelo, Gordon and would be 'combined' to form one super-company combining an extensive distribution network and a high-quality paint manufacturing capability.

Future Shock

So where does that leave us?  In the long run, I think this acquisition will be a positive for the sport, because assuming Angelo, Gordon knows what they're about, it'll give impetus for further investment in the sport by other large players in the financial world.  Despite being the root of all evil, money is still useful to companies for developing new products, enhancing safety and quality to us, the guy on the street who goes to the field every weekend to indulge in the lifestyle that paintball has become. 

Another positive is that with the now-widespread investment by 'real' businesspeople into the sport of paintball, the business side of the sport may now start playing by what are considered civilized rules.  So much of this sport is tied in with dirty tricks, cheap shots and general nastiness that it's driving away genuinely talented people who could make a huge contribution to advancing the sport.  I'm not saying that the  'civilized' business world is all sitting by the campfire singing songs with flowers in your hair nice-nice, but there are rules, and for the most part the 'real' business people follow them.

In the short term, don't look for a huge jump in pricing.  It'll take time for consolidation and there may even be a momentary dip in pricing on paint in particular as the new super-company thins out inventory while they consolidate facilities and personnel.

For the moment, several companies are left looking for friends to watch their back while the 900-pound gorillas start making their moves.  Smaller companies that don't have a huge corporate sugar daddy are now caught outside looking in while the new big boys on the block look to grow their power and influence.  That's not an entirely bad thing.  A smaller company is more nimble and able to adapt faster than the huge conglomerates that are taking over.  The 'smaller' guys (some companies, like DYE, are hardly small) will continue to do business, in many cases selling their products to the big guys to round out their product offerings, while others will find a niche market to cater to, while still others will wither and die, because the big boys don't need them anymore, for whatever reason.

It's a brand new world for 2007, and only time will tell if this new company will be a white knight or monster.

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