Thoughts on Smith & Wesson’s Acquisition of Gemtech

Before I get into this, I need to issue a disclaimer that nothing I say here is based on any sort of insider information.  Sometimes I do get reliable tips from folks in the industry that I then share here. This isn’t one of those cases.

With all of that out of the way, I am sure most readers saw the news from a few days ago that Smith & Wesson’s parent company, American Outdoor Brands Corp (AOBC), purchased Gemini Technologies (Gemtech) and plans to roll the Idaho-based suppressor manufacturer under the Smith &Wesson firearms umbrella. The move marks the first merger between a major silencer brand and a leading firearms company that I can remember, and it may well be the first time this has happened at all. Certainly, it is bigger than the SilencerCo/SWR merger of 2011. So what should we make of it all?

At this point, there aren’t any real details to work with. Gemtech employees will keep their jobs, and the company will continue operations in Idaho. Gemtech just broke ground on a new headquarters in Meridian, ID, about a month ago, and they’ll be moving into the building in just a couple of months. For now, it seems most things will remain the same.

So why would Smith & Wesson acquire Gemtech rather than develop their own line of cans? I think the answer here is relatively simple. First, Gemtech is one of the most tenured names in the silencer world. Gemtech founder Dr. Phil Dater has been building silencers in a commercial capacity since the 1970s. That sort of experience and pedigree isn’t easy to find. Second, the firearms market is slow right now. Prices are the lowest I’ve seen in at least a decade, and in discussing the transaction, AOBC President and CEO James Debney has been quoted as saying, “the market is particularly soft.”

A soft market is favorable for buyers, whether they’re end users or companies looking to acquire additional properties. Slow sales have affected both guns and silencers, but suppressor companies have also been pressed by the ATF 41F changes that imposed additional requirements on silencer purchases and brought sales to a crawl. If AOBC was ever going to acquire a silencer company, this is a ripe environment. Whether or not the financial side of the purchase works out for AOBC remains to be seen. A cash purchase in a slow sales environment like this could raise eyebrows among investors, and right now, the market doesn’t seem to love the move, with AOBC stock down a little over 5% since the acquisition.

For Gemtech, the merger has the potential to yield positive results. An influx of capital could help them to keep up with production of their diverse product catalog, which would lead to better availability across the board. Gemtech’s Ron Martinez has candidly stated that production capacity was something the company intended to address. Last year, Martinez also noted that pricing stood out as an area of opportunity for Gemtech. More capital and better production capacity could contribute to lower prices moving forward.

At this time, the above is just about everything that any of us can say about the merger. Certainly, I’d like to see the Gemtech Mist adapted to the S&W M&P 15-22 at some point, and I know there are other Gemtech/S&W combinations that shooters would like to see, but that’s all speculation at this point. Moreover, there’s no reason to think that AOBC has any sort of inside info on the status of the HPA/SHARE Act/SHUSH Act. There’s simply no way of knowing how those bills will play out in the coming months.