What’s THE firm’s origin story?
I grew up in investment banking, mostly in consumer goods, and had this idea for an operator-led asset management model combining transaction and operational expertise. Instead of running a fund (and all the considerations and trimmings associated), it’s best if the asset managers can focus exclusively on asset selection and value creation and allow the upstream capital to focus on portfolio theory. So I found the business I wanted to buy, capitalized it, bought two more add-ons and ran it for the first 3 years. I handed it off to an internal CEO candidate I had developed and then moved to executive chairman, allowing me to focus on building a portfolio. From there, my partner Ken Plasse joined me and we’ve since added platform #2. Ultimately the plan is to have 3-4 platforms total at a given time and divide our time mostly onsite with management.
What is your investment thesis or value proposition?
Our investment thesis is based on a few principles within consumer packaged goods. First, it’s never been easier to start a brand (and never harder to scale one). Second, the retailers have so much power over those brands. Third, customer acquisition costs are only going up from here, further constraining capital in an already tight environment. Fourth, brands usually must outsource manufacturing competence (making the ones that don’t uniquely valuable) and making niche co-packers, ingredient suppliers and differentiated packaging providers especially valuable.
Our value proposition is our experience in building these businesses — both branded and upstream. Ken and I each have successful operating track records across the spectrum and have tools, playbooks and networks we can bring to scale these niche businesses. We also know our way around the C-suite — we play well in the sandbox and we don’t feel like PE investors with consultative/professorial approaches. We know how to be “in it” as we’ve been in the trenches as operators.
Any notable differentiators for the firm?
Niche focus — we live the CPG ecosystem and we’re highly specialized and suited for certain business models.
Experience in the trenches — we truly understand the struggle in running a manufacturing business and how it differs from other experience.
We’ve scaled — manufacturing businesses do not always scale easily. Often, they’re family owned and lower middle market because big capital allocation decisions are needed to unlock growth. We’ve made those decisions as investors and implemented them as operators and know how to think through the puts and takes from both angles. The added context helps the spreadsheets come alive and make us more aware of biases and blindspots in decision making when it comes to avoiding errors and generating returns.
What are you looking for, and where are you seeing opportunities?
Combination of two factors:
- Niche expertise — we look for specialization
- Value add — we look for opportunities to dynamically transform the value chain
Finally, can you regale us with an interesting or funny m&a story?
Never a dull moment in this business — it’s hard to isolate a single event. At one of our businesses after we acquired a new facility we began doing expansion. The site was in an incredibly small town (<500 population). We needed to grow the site so we started purchasing some of the uninhabited lots (including some abandoned homes) nearby shortly after close so we could begin development. It was difficult to chase down the owners of these lots so we’d monitor the local courthouse auctions to see if anything was ever on the docket. When we showed up to the first one, there were all these bidders contending with us. We quickly learned that some entrepreneurial folks nearby had learned of our expansive plans and figured they could buy the nearby real estate and flip to us for a profit. We ended up cutting deals with these folks and incentivizing them through fees to help us chase down the other owners and managed to keep our costs down, but the whole thing was surreal.
