You’re reading Value Add’s weekly briefing, the leading newsletter for the operating side of private equity. Here’s what you need to know this week, from insights for PE-backed executives and portco news to recent buyouts and investment trends. 

Insights

Chart of the Week: Spindrift Beverage Co., a popular sparkling water brand in the US, is said to be considering a sale or merger. The brand differentiated itself early on by claiming to be the first sparkling water in America that uses real squeezed fruit. Spindrift reportedly brought in $300 million of revenue in the past 12 months, driven by strong distribution in major retailers such as Kroger, Publix, and Whole Foods. 

Spindrift is still relatively small enough as a company, that an additional round of venture or growth investment could propel the brand to a much larger exit to a strategic acquirer in 4-5 years. For example, Spindrift could launch new flavors and verticals, or expand internationally, as the brand’s products are currently only available in the US.

Spotlight

Leonard Green and Berkshire Partners have exited SRS Distribution, selling the company for $18.3 billion to Home Depot. Berkshire, a middle-market buyout firm, originally acquired the roofing and building supplies distributor in 2013, when SRS had fewer than 100 branches and was generating about $650 million a year in revenue. Leonard Green joined in 2018, acquiring a majority stake in the company at a $3 billion valuation. Today, SRS has 760 branches across 47 US states and generates over $10 billion a year in revenue. 

The exit marks one of the most successful private equity deals in the industrial distribution space. Let’s review some of the value-creation tactics that made SRS such a good PE-backed investment:

• M&A Strategy: Since 2008, the company has acquired 118 independent roofing distributors. Roofing supplies, like many industrial products, are often sold through fragmented, local distribution channels. 
• End-User Focus: Roofing is a major part of the $450 billion US construction supplies industry, but it can be difficult for mainstream retailers and distributors to access the professional segment of the market. This allowed SRS to grow without much competition from Home Depot, Lowe’s, and other major building supplies distributors. 
• Human Capital: Navigating the relationship-driven trade of roofing products is complex. Therefore, the company has always been led by executives with experience in the roofing industry, with CEO Dan Tinker and each business unit president having over 20 years of experience in the sector. Moreover, SRS's commitment to its employees and culture was evident in its decision to distribute $250 million to its employees in 2021, as part of an equity incentive plan. 

Buyout News

Ardian has sold Grupo Monbake, a frozen dough supplier, to CVC Capital. The company was formed following Ardian’s acquisition and subsequent mergers of Berlys and Bellsolá in 2018.  The combined company created the third-largest producer and distributor of frozen pastries in Spain, following Grupo Panstar and Europastry. The transaction price was not disclosed. (Source)

Cinven has decided to pause negotiations to sell European pet food maker, Partner in Pet Food. The company was reportedly valued at around $2.2 billion but bids from Advent International and CVC Capital were lower and talks stalled. Cinven acquired the Hungary-based pet food supplier in 2018 and is looking to exit after a strong year — sales were up +16% to $867 million in 2023. (Source)

Apax Partners is reportedly preparing to exit PIB Group, a British insurance brokerage. The company is forecast to generate EBITDA of $315 million this year, and Apax is seeking a valuation near $5 billion. Apax acquired the company in 2021. (Source)

L Catterton’s deal to acquire luxury shoemaker Tod’s has hit a snag. Shareholder Tabor Asset Management issued an open letter saying the buyout offer of $1.5 billion was far too low. Tabor, which owns a 1% stake in Tod’s, believes the company is worth closer to $3 billion. Tod’s founders, the Della Valle family, tried to take the company private in 2022, but Tabor voiced similar concerns which convinced other shareholders not to proceed. (Source)

The Nuvei deal that we reported on last week is now official. Advent International is acquiring the Canadian payments company for $6.3 billion. The company’s shares have been trading -80% lower than their highs in 2021, but EBITDA and revenue were up 40%-50% in Q4 2023. (Source)

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