If you’ve been following the gun business at all, you probably know that American Outdoor Brands — Smith & Wesson to you and me — has been on a buying (read: diversification) spree for the last couple of years. Adding brands like Crimson Trace, Battenfield Technologies and Taylor Brands, among others, Smith American Outdoor has transitioned from a venerable maker of handguns to a full-line producer of “quality accessory products for the shooting, hunting, and rugged outdoor enthusiast” as their press releases say.

Their latest move to broaden their line, announced over the weekend, is to jump into the suppressor business with both feet by buying Idaho-based Gemtech.

James Debney, President and CEO of American Outdoor Brands, said, “Gemtech is widely recognized for producing some of the finest rifle and pistol suppressors in the market.¬†Gemtech’s strong product development capabilities, combined with our experience in brand management and our manufacturing expertise, will help us to efficiently develop both firearms and suppressors, minimizing our time to market for both product categories.

We view this acquisition as opportunistic, allowing us to enter the suppressor category, which resonates strongly with our core firearm consumer, at a time when the market is particularly soft. These elements combine to make Gemtech an excellent fit with our long term strategy.”

About the only part of the gun business American Outdoor isn’t involved in now is ammunition.

The Gemtech acquisition puts AOB solidly in the same highly diversified category as competitors such as SIG SAUER, Remington, Ruger and Vista Outdoor (though Vista’s far less invested in actual firearm production that the rest). Broadening their product lines obviously insulates them from the slings and arrows of the political and regulatory environment.

While eight years of the Obama presidency and expectations of a sure-thing Hillary administration kept fears of new regulations — and therefore sales — high, that all changed in November. So, less reliance on firearm sales should insulate these companies from the resultant drop in demand — the “Trump slump” as it were.

But there’s an inherent risk: lack of focus. It’s no secret that Remington had, shall we say, a few difficulties keeping their eye on the quality control ball during their buying and consolidation spree. Problems that they’ve spent a good two-plus years trying to reverse. When the bean counters and synergizers take precedence over the engineers and production people, quality — and thus the brand as a whole — can take a big hit.

That’s not to say that American Outdoor will suffer the same problem. They don’t have a rapacious equity fund driving their acquisition binge, looking to make a quick pump-and-dump killing in the gun biz. So when managed well, turning a venerable 165-year-old gun brand into a diversified outdoor equipment conglomerate should, all in all, be a good thing. Right?

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32 Responses to CapArms Question of the Day: Is Firearms Industry Consolidation a Good Thing?

    • As soon as I read it, I thought the same thing. Package deals with M&P pistols/rifles. Smart move if you ask me.

    • And like a dope, I left a comment on this on the previous post instead of scrolling up to this one – so now I’ll repeat it:
      Very interesting.
      In anticipation of the passage of the HPA, it had been my recommendation to invest in Ruger stock; my reasoning being that they were (at the time) the only major arms maker with their own line of suppressors. Now it seems S&W has their foot in the door too.
      Anyone know if SigSauer has cans too? Seems they should given everything else they do now.

  1. I think, whether good or bad, consolidation is inevitable. There are too many players now, and though there are some really awesome small players like Q, I don’t think they can all survive selling $2-3000 rifles and high-priced accessories. Something’s got to give. I can easily see some of the second tier players like LWRC or POF tieing the knot just to survive the coming downturn.

  2. I don’t think consolidating businesses under one company name is a good idea whatsoever. When these big outfits like Smith and Wesson Freedom group AKA Remington Outdoors buy up all the small companies the quality of the product that those companies wants made and sold turns to dirt. Case and point Marlin rifles once were an inexpensive well-made quality product Intel Freedom group AKA Remington Outdoors purchase them and move the company and turn the entire rifle to crap. I like to see small businesses and small business owners in this country we weren’t founded on big box stores in huge corporations that monopolize the market and set the standard for quality. This is a bad thing.

    • I think comparing S&W to Freedom Group is a poor example. One is primarily a gun company scooping up related businesses and diversifying its portfolio, the other is a non-gun company that sought to make a buck by buying up troubled companies and “fixing” things to make them more profitable.

    • First off, there is no monopoly out there. Sheesh. There are thousands and thousands of licensed firearms manufacturers out there, nearly twelve thousand, as a matter of fact. Most of them would probably love to get bought out; some may have gone into the business with that purpose. On top of that, there are another 1,100+ licensed importers of firearms.

      Regardless, what matters isn’t any given company’s market share. Any given company has to earn and re-earn that on a daily basis. It isn’t a given. (Ask Walmart…or Kmart before that…or Sears before that….or the Great Atlantic Atlantic& Pacific Company before that….)

      What matters are the barriers to market entry, both legal/regulatory and financial. It really doesn’t take that much expertise and equipment to tinker around in the shop and develop a firearm. Plenty of people do it and any slacking by the big boys only invites more to do it.

      Second, many small companies relish the opportunity for a buyout, not just to cash out, but to gain access to more and larger markets, more R&D resources, greater advertising budgets, etc. There are failures out there, sure, but there are wins, too. The issue is whether they manage the acquisition prudently and whether it made sense to begin with. That’s as much an issue with a big buying out a small business as it it with a merger of major corporations. There’s nothing special or magical about small businness.

      As for rapacious

    • Hoffa, you’re talking out of your ass. Marlins are still beautiful, quality rifles and very competitively priced.
      FLAME DELETED

  3. so consolidation is diversity?

    it lends capital and the ability to source high quality materials, tech and manufacturing processes.
    it often drives the need for reduced overhead costs.

    i would prefer the diversity in the industry, not the portfolio.

  4. I think smaller independent gun companies are better-but nobody cares what I think. I am not invested in any gun stocks. I just want a quality product,available and at a good price…

  5. I’m guessing Crimson Trace and Gemtech have some valuable IP that AOBC now controls and will license and enforce accordingly. Did either company do anything special with their lasers or suppressors that were innovative?

    Interesting tidbit from their latest 8K, AOBC plans capital expenditures around $40 million on tooling for new products.

  6. When actual gun companies run by gun guys acquire other companies in the same or related business, that can be a good thing. Smith is spreading out its risk while leveraging its core competencies and core products. It’s acquisitions have been very solid.

    When investor companies whose executives wouldn’t know a gun from a rectal syringe go on an acquisition binge, it’s a disaster.

    Case in point: S&W products have never been better. Remington’s have never been worse.

    Another case in point: S&W once owned Smith and Wesson Security Service. It was a disaster and IIRC, Smith folded it after not being able to find a buyer. Why S&W would wander so far from its core business is anybody’s guess.

    • Agreed, with the added thought that consolidation of manufacturing in a new location usually results in a loss of the expertise of long time gun makers, craftsmen in their own right, such as occurred at Remington. another issue is the loss of the talent that founded a small company, as has been the case with at least two Remington acquisitions that I can think of off the top of my head, where the company founders found themselves at odds with new management, departed, and restarted their old companies under new names. This is diversification gone bad. And this is to say nothing of the economic impact of closing plants, leaving many older workers permanently unemployed if they wish to remain in their home towns. It would seem that the diversification process works best when the target companies are treated as separate businesses under a corporate umbrella that offers infrastructure support and financing, rather than as a new division where heads can roll over personnel conflicts and differing management styles.

  7. If GEMTECH was brand new, and they got bought-up, that might be ok.

    Being absorbed now is nothing short of a market contraction.

    I think it’s a contraction just shy of a pending bull market for the industry, so it’s a shame that they could not hold out for another year.

  8. Being the skeptical curmudgeon that I am, it would not surprise me to learn one day that the gun control crowd has a hand in this. Buy up everything, then control availability. Whether a consolidation results in certain business lines disappearing at once, or slowly through degradation of quality such that sales decline to near nothing, the end result is fewer product on the market.

    Bill Gates built his empire on two principles: software that is good enough, is good enough; buyout and disappear any company producing superior software.

  9. Mr. Farago, I don’t think “consolidation” means what you think it means.

    If S&W bought Sturm, Ruger & Co., that would be consolidation. If they bought companies that make barrels and other gun parts, that would be consolidation.

    Buying companies that are neither your competitors nor your suppliers – that’s diversification, not consolidation.

    Is it a good thing? The market will determine that.

  10. When they lose their soul of quality control for the bottom line they become worthless. For example Remington.

  11. I don’t think buying Gemtech explains why S&W is suddenly showing a 100% loss in their stock price.

  12. There aren’t too many S&W handgun models with threaded barrels offered off the shelf. I’ve never actually seen one (in real life). If buying a suppressor company changes that, it’s a good thing in my opinion.

    On the other hand, I think “too big to manage” is going to happen in the gun industry long before “too big to fail” ever does.

  13. I think it depends on the extent to which they buy up companies and management.

    At a certain point a company simply gets too large to manage. There are too many departments and brands under the umbrella for management to keep up. Proctor & Gamble had that problem.

  14. My experience (former life) with consolidation is in the Farming sector, namely John Deere. My family started a Dealership and after nearly 40 years, we “merged” into a 5 Dealership group. Were the farmers, etc. in our trade area upset? You bet they were, price shopping just got tougher for them. On the upside, merging kept all of the locations open so that was a big plus for our Customers. Fast forward 5 years, when our new Dealership merged with another Dealership group. We now had a footprint that covered over 1/4 of our state and edged into 3 others. Were the farmers upset? Not so much this time, as all locations were kept open and keeping up with technology is “doable”.
    Are there shopping options limited? Somewhat, but we diversified into several other technology driven aspects of farming that a single Dealership would not be able to afford to offer.
    To sum it up, consolidation is coming quickly to the firearms industry, like it or not. There is an upside for the consumer in the fact that Big companies will buy Little companies just for their products.

    • I have seen what John Deere has done to family-owned dealerships. Good for Deere? Probably. Good for farmers? No way, Jose.

      GM and Chrysler did a lot of the same thing in the post-2009 crash. Either you were one of the lucky dealers “allowed” to stay open, or not. Family businesses, pillars of their communities for a century or better – gone. Just as bad – sales taxes shifted from small communities to large ones, where the big dealers remained.

      • I don’t believe you know much about today’s farming practices. It’s not a 4 row planter pulled by a 100 hp 2 WD tractor world anymore.

  15. Diversity of industry is IMO a good thing; Consolidation can be healthy too, but only within a certain point.

  16. I’m concerned that too much of the industry being consolidated into a small pool of owners creates a bigger risk that an economic downturn or issue within a company could take down a whole swath of products, knowledge, and capacity. And if we run into another instance of owners/management capitulating in some manner to Antis, the reach is further and wider if ownership has been concentrated than if there were a greater number of smaller, more independent companies.

  17. How long before Sig acquires a shotgun manufacturer and starts churning out $900 Legion pump-actions for a huge margin?

  18. Just wait until the playbook expands… Take a look at what Vail has down with skiing and outdoor recreation. They own resorts all over the country, they own real estate surrounding the resorts, they own lodging, they own retail outlets that sell the equipment used on their properties. In short they own just about the entire value add of the skiing recreational channel.

    That’s probably what’s coming to firearms and shooting sports. Sig bills itself as the complete provider and already sells silencers, optics, firearms and ammo in addtion to running a shooting academy..look for others to expand that concept and start buying up and expanding shooting ranges. I mean what good is it to sell a gun and a consumable (bullets) if your customers don’t have access easily to expend said items so they need to buy more?

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