From time to time we like to highlight a middle market private equity firm’s recent transaction history to shed some light on how these firms operate and how they focus on growing and expanding their holdings.
Ronnoco Coffee, a portfolio company of Huron Capital, has acquired Beverage Solutions Group. This is the eighth add-on acquisition for Ronnoco since being acquired by Huron Capital in September 2012. Beverage Solutions Group (BSG) is a provider of beverage equipment to convenience stores, food service locations and offices. The company’s products include creamer and sugar stations, sugar and sweetener stations, and other custom dispensing machines.
And here is the description of Ronnoco Coffee:
Ronnoco Coffee roasts, blends, grinds, packages and distributes coffee and teas under six primary brands: Ronnoco, Seattle Roast, Wild Horse Creek, Henderson, Coffee House and Camellia. The company also provides a variety of other beverages, such as cappuccino, hot chocolate, and smoothies, and coffee-related products and equipment, including cups, flavoring syrups and condiments.
Note the clear synergies in this transaction. Beverage Solutions Group and its products market to the same customer base that Ronnoco and its other brands focus on. These synergies are key.
We have no idea how many other suitors Beverage Solutions was courting at the same time. Nor do we know how many other targets Ronnoco/Huron were examining before making this investment. Odds are good that there were quite a few on both sides. The important issue to realize here is that the intangible assets (aka, off-balance sheet assets) were what ultimately caused Ronnoco/Huron to take the leap at this opportunity.
We have examined off-balance sheet assets before. These are items that are nearly impossible to quantify on your balance sheet but they are usually the most important component of any transaction. Think of it as the old 2 + 2 = 8 theory.
The fact is that when a seller is not represented by an investment bank like Generational Equity, they often undervalue their intangibles, such as business methodologies, customer list, and brand recognition. Peter Drucker, one of the leading management gurus of years past, put it best when he famously said, “the buyer rarely buys what the seller thinks he is selling.”
This really applies when you consider your business and tally the list of intangibles that make it unique. If you think your buyer is only buying the present value of your future earnings, you have already undervalued your opportunity. You must consider what different buyer groups would find attractive about your business and, once you have done so, emphasize those intangible assets in all your documentation.
The second feature of this transaction that caught my attention was the sheer number of additional acquisitions that Ronnoco has made since Huron partnered with them in 2012:
This is the eighth acquisition Ronnoco has made since being acquired by Huron in September 2012. The company previously acquired International Blends, Henderson Coffee, the coffee and tea business of Love Bottling Company, Biff’s Coffee, Beverage by Quench, U.S. Roasterie, and Black Waters Coffee Company. “For over 20 years, Beverage Solutions has provided high-quality products and equipment along with excellent customer service,” said Matt Hare, a partner at Huron Capital. “The addition of Beverage Solutions expands Ronnoco’s national footprint from 35 to 43 states and provides additional distributor relationships.”
As we have described before in past posts, this type of add-on activity is quite common amongst equity firms that focus on middle market companies. An initial investment in a platform company is made, and multiple, usually much smaller, companies are acquired over the course of 5-10 years (sometimes even longer in the case of family offices). The goal: To build a much larger, highly synergistic firm with the goal of selling it or taking it public in the future.
This is clearly the case with Huron with eight add-on acquisitions over the span of seven years. Odds are really good that there are several equity firms like Huron operating in your industry. Since they usually fly under the radar screen to avoid publicity, you may not even be aware of them.
But we are!
We have over 34,000 registered buyers in our buyer database, a good portion of which are equity firms that have given us very specific criteria of what they are looking for in add-on acquisitions. Plus, our deal teams are extremely experienced in working with and negotiating transactions with these firms. They know how to package documentation to highlight a company’s intangible assets and which equity firms (plus other buyer types) to approach that will pay a premium for these off-balance-sheet assets.
If you would like to learn more about how these types of firms operate and why your company may be of interest to them, visit our website, provide us with your contact information, and we will be in touch.
And kudos to Huron for having such a brilliant plan and executing on it so efficiently!
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2019 Generational Equity, LLC. All Rights Reserved.
The information we learn from customers helps us personalize and continually improve your experience. Here are the types of information we gather.
We receive and store any information you enter on our Web site or give us in any other way. We do not sell or rent your personal information to others without your consent. We use the information we collect only for the purposes sending promotional information, enhancing the operation of our site, serving advertisements, for statistical purposes and to administer our systems. We DO NOT use third parties to provide customer service, to serve site content, to serve the advertisements you see on our site, to conduct surveys, to help administer promotional emails, or to administer drawings or contests, but reserve the right to do so in the future without advance notice.
Generational Capital Markets, Inc.’s affiliates are all part of one corporate family, they work with one another and may work together to provide services to you. The sharing of your information among affiliates enables Generational Capital Markets to serve you more efficiently and makes it more convenient for you to do business with Generational Group. Generational Capital Markets is permitted by law to share information with its affiliates. All of our affiliates follow similar privacy policies.
For reasons such as improving personalization of our service, we might receive information about you from other sources and add it to our account information.
Generational Group may license the use of its intellectual property including but not limited to its name, likeness, and logo for the use of affiliated offices. Such affiliated offices may not be owned, controlled, managed, supervised or staffed by employees, officers, or agents of Generational Group. Affiliated offices may be independently owned and operated. For more information about a particular office, please contact Generational Group at its office in Dallas, Texas.
This page may contain other proprietary notices and copyright information, the terms of which must be observed and followed.
Information on this web site may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Generational Group may also make improvements and/or changes in the products and/or the programs described in this information at any time without notice.
Generational Group does not want to receive confidential or proprietary information from you through our web site. Please note that any information or material sent to Generational Group will be deemed NOT to be confidential. By sending Generational Group any information or material, you grant Generational Group an unrestricted, irrevocable license to use, reproduce, display, perform, modify, transmit and distribute those materials or information, and you also agree that Generational Group is free to use any ideas, concepts, know-how or techniques that you send us for any purpose.
Our computer system protects personal information using advanced firewall technology.
Information Generational Group publishes on the World Wide Web may contain references or cross references to other products, programs and services that are not announced or available in your country. Such references do not imply that Generational Group intends to announce such products, programs or services in your country. Consult a Generational Group representative for information regarding the products, programs and services which may be available to you.
Generational Group makes no representations whatsoever about any other web site which you may access through this one. When you access a non-Generational Group web site, please understand that it is independent from Generational Group, and that Generational Group has no control over the content on that web site. In addition, a link to a non-Generational Group web site does not mean that Generational Group endorses or accepts any responsibility for the content, or the use, of such web site. It is up to you to take precautions to ensure that whatever you select for your use is free of such items as viruses, worms, Trojan horses and other items of a destructive nature.
IN NO EVENT WILL Generational Group BE LIABLE TO ANY PARTY OR ANY DIRECT, INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES FOR ANY USE OF THIS WEBSITE, OR ON ANY OTHER HYPERLINKED WEBSITE, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF PROGRAMS OR OTHER DATA ON YOUR INFORMATION HANDLING SYSTEM OR OTHERWISE, EVEN IF WE ARE EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Generational Capital Markets, Inc. ("GCM"), member FINRA/SIPC, is wholly owned by Generational Capital, LLC ("GC"). Both GCM and GC are affiliated with Generational Equity, LLC; and all part of the Generational Group of companies. This website is solely for general informational purposes and is not guaranteed by us to be accurate and complete statements of fact and should not be relied on as such. Opinions in this website constitute the current judgment of the author as of the date and its last update. The content of this website does not necessarily reflect the opinions of GCM, and is subject to change without notice, and GCM is not under any obligation to update or keep current any information contained herein. This website does not constitute any personal recommendations and does not take into account the specific investment objectives, financial situation or particular needs of the reader. The information contained in this website should not be construed as an offer, or a solicitation of an offer, to buy or sell any securities or other financial investments. The information presented should not and cannot be viewed as an indicator of future performance. To the extent permitted by law, GCM does not accept any liability arising from the use or retransmission of the information in this website.
Furthermore, all information contained within this website is the property of Generational Group.
Honored to win Investment Banking Firm of the Year 3 years running.
Over 50 awards and counting.
Sign up to receive regular email updates, industry-leading insights and details on complimentary M&A executive conferences in your area from our award-winning team
Success, you have been added to our list.