Loyal readers of this column know that from time to time we like to highlight specific deals that have recently closed. We do this when the completed transaction has some specific features that you might find of interest.
In this case, the deal that caught our attention was the announcement last month that Boot Barn acquired RCC Western Stores (RCC). The deal included not only RCC’s 29 retail locations but also its website and brand.
The synergies of the deal are clearly apparent. Boot Barn’s retail operations are located largely in the western half of the U.S., and RCC has a strong retail presence in the Midwest and the South. Combining Boot Barn’s 85 locations with RCC’s 29 now creates, according to the press release, “the largest specialty retailer in the industry, with stores coast-to-coast.”
The transaction was announced on Aug. 8, 2012. The most interesting facet of this deal though is that Boot Barn was itself acquired by Freeman Spogli & Co., a leading middle-market private equity firm, in December of 2011.
This is how Brad Brutocao, General Partner of Freeman Spogli, described the transaction last December:
"Patrick Meany and the entire Boot Barn team have done a fantastic job establishing Boot Barn as the leading destination for authentic western and work wear. Boot Barn's customers value the company's broad selection, strong customer service and convenient shopping options both in stores and online. We are pleased to become a long-term investor in the company and look forward to helping Boot Barn continue its growth."
I highlighted the last segment of that paragraph on purpose. We are hearing lots of noise right now about how evil equity firms are and how they acquire companies simply to saddle them with loads of debt and/or sell off the assets.
Although some equity firms that specialize in billion-dollar deals have learned the hard way how excessive debt can destroy a great investment, firms that specialize in the middle-market, like Freeman Spogli, acquire companies to help them grow.
They don’t do this for altruistic reasons. Their focus is on generating an ample return for their investors. And the best way to do this is to acquire a platform company like Boot Barn and then “add on” to it by making additional synergistic acquisitions during the ensuing years.
Hundreds, if not thousands of equity firms located in North America are using this strategy today. Quite often, because of the relatively small size of the deals, most of these transactions fly under the radar.
In fact, there are probably equity firms creating platforms in your industry right now, and you are unaware of it!
There is one more point that we would like to make about the Freeman Spogli acquisition of Boot Barn. According to the press release at the time:
“The existing management team, led by Patrick Meany, will continue to manage and operate the business.”
What does this mean? It tells us that Boot Barn’s existing ownership and management team participated in this sale by retaining a partial interest in the business. This will allow them to participate in a secondary liquidity event when the new, larger entity is sold or taken public in a few years.
This creates a win-win for both the equity firm and the management of Boot Barn. Freeman Spogli gets access to industry experts to grow the business and Boot Barn gains a financial and marketing partner to help it grow and achieve its goals.
Again, this is just one example in one industry of this in action. Generational Equity is in contact with hundreds of buyers across North America that are exercising the same roll-up, add-on strategy. It most likely is occurring at some level in your industry.
If you have great ideas on how to grow your business but lack the capital and the financial know-how to achieve them, you should attend one of Generational Equity’s no-obligation M&A workshops. While there you will learn about how you too can effectively manage your M&A process and find optimal buyers for your business.
No matter what, if you need investment partners, keep equity firms in mind. They have capital to burn and are pursuing add-on acquisitions like never before. In fact, according to many estimates, nearly half of all acquisitions now completed by equity firms are add-ons. So keep that in mind as you look at your expansion plans.
© 2012 Generational Equity, LLC All Rights Reserved
Dear Chris and Andre, I just wanted to say thanks for all your help. Even though this process was not an easy one, it was comforting to know that I had a capable team standing beside me. You made me feel like we were almost your only client or at least the most important one. Thanks again, and I will recommend your service in the future.Shenille Engelhart, Owner – CLS Technology
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I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
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I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.Bryan D. Horn, Owner, Over Under Clothing
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
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We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
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Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!Andy Graham, Vice President, Modern Heating & Plumbing
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!Eric Erlandson, Owner, Action Fastenings, Inc.
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
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We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.Michael J Polarek, President, Paragon Packaging
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.Pete L.
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
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