From time-to-time, we like to bring completed transactions to your attention in order to highlight key features of how buyers operate and plan their transaction activity. Recently a deal caught my attention because it is a perfect example of exactly how a private equity firm pursues an add-on strategy.
The equity firm is named Guardian Capital Partners (Guardian) and it recently acquired PetFusion via its platform company, Cosmic Pet. PetFusion is an online seller of dog and cat products including cat furniture, dog beds, litter solutions, and toys. PetFusion is the fourth add-on investment for Cosmic Pet, further transforming Cosmic Pet into one of the largest pet hardgoods and accessories companies in North America.
The original platform company was acquired by Guardian in 2016. The Company now has a large portfolio of brands including Hyper Pet, Pet Zone, OurPet’s, Aussie Naturals, Wild Eats, Ultra Paws, and Mad Cat.
According to Peter Haabestad, co-founder and Managing Partner of Guardian and Chairman of Cosmic Pet:
“The addition of PetFusion enhances the offering Cosmic Pet can provide to its valued end-customers and we are incredibly enthusiastic to have the PetFusion executive management team join Cosmic Pet’s extended management team. This most recent add-on investment continues to demonstrate how much Guardian believes in Cosmic Pet as an outstanding platform company.”
Although the sizes of the add-on companies are not disclosed, in typical add-on scenarios, the companies added to the platform tend to be far smaller than the original platform acquisition. In fact, according to Guardian’s recently published investment criteria on their website, they have no minimum revenue or EBITDA requirement’s for add-ons.
The goal of equity firms like Guardian that focus on companies in the middle market is building value through investing capital in a firm and enriching its business model by bringing professional marketing processes, sales, and financial experience honed over countless years to the acquired firm. This gives the added companies access to skillsets that normally would not be available to them.
This is a real benefit to business owners that have built a legacy in their company and would like to see the legacy continue and grow. In addition, in many cases, the equity firm retains the management team under a newly capitalized format as partial owners, allowing them to participate later in a second bite of the apple when the much larger entity is sold or taken public.
If you and your team are not interested in an immediate exit, then the add-on scenario as practiced by Guardian might make sense for you. And odds are good that there are equity firms, like Guardian, operating in your industry as well. In fact, quite often clients are surprised when we create buyer lists that have equity firms with holdings in their industry that they were not aware of.
And one other item to consider, equity firms are not just operating in the “sexy” industries. Guardian is an excellent example of this. They are strategically expanding in the pet products industry because their research demonstrates that pet ownership is on the rise and will be for years AND that Americans are spending more on their pets than ever before.
Definitely not a “sexy” industry, but one with huge upside. Other industries are just as fragmented, most likely yours is too, allowing for equity firms to gain substantial market share over time.
To learn more about how add-on strategies might make sense for your firm, you should arrange to attend a Generational Equity exit planning conference. Even if your eventual partial or full exit is years away, it is far better to start planning early than delay. To learn more about how you can participate in an add-on strategy, please use the following links:
Carl Doerksen is the Director of Corporate Development at Generational Equity.
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I decided to attend the conference and hopefully receive some guidance on how to structure an exit plan of my business. Upon arriving at the conference, I was so impressed with the presentation given by Generational Equity that I set a future appointment that week to discuss the possibility of selling my business with their Senior Managing Director David Robinson.JoAnn Ellis, Owner of Fondren 5 Star Kennels
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
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We had the pleasure of working with Mr. Ahmad Behjati Managing Director, M&A, for Generational Equity during our acquisition of Papa's Dodge in late 2021. Generational Equity and Mr. Behjati represented and marketed Papa’s Dodge. As our primary contact, Mr. Behjati was professional in every facet of this acquisition process, conveying valuable advice most times and assisting us in every step of the process.Rick Greene of Dobbs Equity Partners LLC
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The professionals at Generational Equity then helped develop a roadmap for enhancing the value of the firm and an evaluation report. This was completed by June 14, 2021. We then developed the Confidential Information Memorandum and put Taylor Studios, Inc. on the market by July.Betty L. Brennan, President, Taylor Studios
Generational Equity’s professional staff helped me every step of the way. Their network and professionals are the only reason I sold my company this quickly. For me this is a once in a lifetime sale and I was unfamiliar with the process. I was able to lean on them with questions and concerns.
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
We were represented by Michael Goss with Generational. The due diligence was grueling and exhausting, but Michael propped us up and kept us motivated throughout the process. Debi and I continued to ask each other how we could possibly make it through this process without the assistance of Michael. Michael's professionalism and knowledge is absolutely amazing, and we are so blessed to have had him by our side as we made our future dreams come true.Bob and Debi Lee, Owners of BL Technology, Inc and BL Tl Services, LLC
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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
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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.
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.
Thanks to you, the entire GE team and especially Michael Goss for driving a great valuation, coaching me and driving the process across the finish line. Please let me know if there is anything I can do to support GE going forward. P.S. Given my experience with GE I felt comfortable enough to sign up with Generation Wealth Advisors!Tom Currier, Former President & CEO, Rackmount Solutions
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Through the sale process, Generational brought in several interested buyers and we closed in about 6 months. I am so glad I accepted that invitation to the conference and could not be happier with the whole process. The team at Generational coupled with their knowledge and guidance was so valuable that in the end, I know I could never have done this on my own!JoAnn Ellis, Owner of Fondren 5 Star Kennels
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