“The secret of success is constancy to purpose.”

Benjamin Disraeli


RAF in action: Case History – Smartwool

1995 — In early 1995, Peter and Patty Duke visit RAF, looking for an investor to provide dollars and expertise to Smartwool, the company they have founded in their hometown of Steamboat Springs, Colorado. Smartwool designs, manufactures and sells merino wool hiking and ski socks. Peter and Patty have figured out how to make performance-oriented merino wool socks that, among other things, can be put in the dryer. Concluding that the socks are the most comfortable on the planet and that the branding is compelling, RAF invests a six-figure sum and acquires 30% of the company. Smartwool’s 1994 sales were approximately $300,000. In the fall of 1995, Smartwool needs more capital, and RAF acquires an additional 29% of the company. The Dukes continue to own approximately 40% of the company.

1996-1997 — Smartwool begins to expand its product line, introducing running, biking and casual socks. Sales in 1996 exceed $2,000,000 and reach $5,700,000 in 1997. The company wins a number of industry awards for product quality. As a result of this momentum, Smartwool is offered the opportunity to provide private label products to LL Bean.

While the potential sales volume would have led to significant short-term growth, the decision is made to protect the brand and decline all non-branded sales. Within twenty-four months, LL Bean agrees to give Smartwool-branded product prominent placement in its catalogue and its flagship store.

1998-2000 — The management team expands to include top level industry professionals in sales, finance, marketing and product development. The product line is expanded to include apparel. A deal is struck with the wool growers association in New Zealand to provide Smartwool with exclusive access to the high quality merino wool used in its products. The deal provides long-term and badly needed price stability and predictability to the growers, as well as supply assurances for Smartwool. Long-term currency hedges are deployed to provide Smartwool with cost certainty. On the sales side, Smartwool expands beyond the specialty ski and outdoor channels, adding distribution in selected big box retailers, upscale department stores and comfort shoe stores. Sales in 2000 exceed $18,000,000.

2001-2003 — With professional management fully integrated, the Dukes realize their goal of financial security and the opportunity to pursue new challenges by selling their remaining interest in Smartwool to RAF. RAF, together with management and certain affiliates of RAF, becomes the sole owner of the business. The company continues to grow at the pace of 20-30 percent per year. A sophisticated website is built, with Internet sales added to the mix. The company’s sales in Europe become an important part of the business, with distribution established in the United Kingdom, Scandinavia and Germany.

2005 — Smartwool’s annual sales now exceed $40,000,000. RAF and management conclude that the company’s future growth will be more dependent on apparel and international distribution; both are areas where the company would benefit from being part of a larger, multi-national player. Smartwool jointly develops a shoe, co-branded with Timberland, featuring Smartwool lining. Timberland has a corporate culture that is very similar to Smartwool’s. Both companies are people-oriented, emphasize the importance of product quality and are committed to being good corporate citizens. After considering other synergistic acquirers, the decision is made to sell Smartwool to Timberland. After receiving commitments from Timberland that the company will remain in Steamboat Springs with all of its current team intact, the transaction is completed in December 2005. The outcome is an exceptionally good one for RAF and Smartwool’s employees.