A private equity firm plans to invest $75 million into Corsair.
Everyone take a sigh of relief, Corsair isn't for sale, and therefore isn't at risk of ending up in the hands of a person or organization that doesn't share the same passion for PC peripherals as Corsair does. What about the rumor floating around that suggests Corsair may be sold to private equity firm Francisco Partners? Corsair tells Maximum PC the rumor is "inaccurate," though the company is looking to secure an investment.
Corsair sent Maximum PC an FAQ that addresses several questions, which we've posted in its entirely below. Straight and to the point, however, Corsair says it's still making a profit, and though it's run its operations for nearly two decades without any outside investment, it's seeking one now as it looks to continue acquiring companies.
"We would like to make more acquisitions and this requires outside investment. That’s why we targeted the IPO market last year, but ultimately chose private investment from Francisco Partners instead because we believed the public markets did not properly understand or value our market niche," Corsair states in its FAQ.
The planned investment is for around $75 million, and we have to question why Corsair doesn't simply take out a loan instead of selling off a chunk of its company. One possible answer is that banks don't just hand out $75 million loans willy-nilly, even to profitable firms. It's also possible Corsair prefers to sell off a stake in its firm to avoid the pressure of having to repay a loan by a certain date.
In any event, Corsair insists the move won't negatively impact its customers, and if anything it will prompt the company to be more aggressive in its bid to lead the gaming and music markets.
Is Corsair going to be sold?
No. However, we are securing an investment from Francisco Partners, which will be a new shareholder for the company.
How will this affect Corsair?
The new shareholder, Francisco Partners, is a private equity (PE) company and is planning to make a significant investment in Corsair. The current management team will stay in place and no management changes are planned. Of the three founders who started Corsair 19 years ago, one has retired. Andy Paul and John Beekley are still very much involved and will remain meaningful shareholders in the business.
Who is Francisco Partners and what is private equity all about?
Francisco Partners is a well-respected private equity (PE) firm located in the SF Bay Area that specializes in tech companies. Private equity is an alternative to public funds (i.e., going public) and PE companies typically bring industry and operating expertise to the table in addition to capital. PE is particularly attractive when the public markets are not sensibly valuing certain market segments. This is the case with any company involved around PCs today. The fact is that for companies like Corsair, the PC market is alive and well, since our focus is the gaming and enthusiast market, which is growing and shows no signs of stopping.
Why does Corsair need cash anyway, I thought they were profitable?
We are profitable and have been able to run our operations for 19 years without any outside investment. We have grown in terms of customers and product breadth, and we now ship over 10 product lines to over 60 different countries around the world. Recently, we have started to make acquisitions, since we find that small companies making just one type of component cannot be efficient in the market the way we can be. In the last year we have bought two companies, one German company specializing in gaming peripherals, called Raptor Gaming, and a Scottish company making multi-room streaming music systems, called Simple Audio. We would like to make more acquisitions and this requires outside investment. That’s why we targeted the IPO market last year, but ultimately chose private investment from Francisco Partners instead because we believed the public markets did not properly understand or value our market niche.
What does this mean for Corsair customers?
It means we will continue to do more of what we do well–design exciting products for enthusiasts, whether they are enthusiasts in overclocking, building gaming PCs, gaming, or listening to high quality music. These are the things we are enthusiastic about here at Corsair. We enjoy making really cool products for our customers and ourselves. Will Corsair products continue to meet the same high standards of quality? Absolutely. Our goal is to make the best products we can for every-type of customer, regardless of the price point. Making great products is what has enabled us to become successful and we have no intent of changing that. Less well-run companies sometimes have to cut quality levels to make any profit and thus stay in business. We have all seen that happening in our industry. We continue to be profitable because we always make great products that our customers enjoy and our quality levels are very high, so we never have to cut corners. Our new financial partner has spent months talking to us and to our distributors and retailers, as well as taking stock of what our customers think about Corsair and Corsair products. The overwhelming positive things the heard is the reason that they are making a significant investment in the company.
What sort of investment are we talking about?
The planned investment is approximately $75M.
When will all this happen?
The transaction is expected to close in the next few weeks.
What should we expect to see in the future?
We may pursue more acquisitions, perhaps some larger than before. Above all you should expect to see Corsair take a more aggressive approach to becoming a leader in the gaming and music markets, taking the same important position that we hold in the PC enthusiast market.