ICYMI – WSJ Highlights how Private Equity Helps Family Businesses

Private equity firms play substantial role in adding value to family businesses as they pass from one generation to the next.

This week, the Wall Street Journal published a story highlighting how private equity strengthens family businesses looking to grow or expand. For many entrepreneurs, private equity is a critical partner that can provide capital and industry expertise. The article highlighted three AIC member firms—L CattertonIncline Equity Partners, and the Riverside Company— for their roles in providing stronger value to a family-owned wine merchant, pet food producer, and CPR safety training business that all chose to partner with private equity. To read the full story from The Wall Street Journal, click here.

L Catterton – Nutrish Brand

“In 2014, some members of the Lang family were approaching retirement and looking to cash out of their 80-year-old pet-food business. L Catterton, a Greenwich, Conn.-based private-equity firm that invests in consumer brands, spotted an opportunity.

Americans’ growing obsession with their pets had recently spurred Ainsworth Pet Nutrition LLC to shift its focus to growing its premium offerings under the Nutrish brand, a partnership with celebrity chef Rachael Ray. L Catterton wanted to bring the brand to the mass market. 

But first the firm had to win over the Langs. L Catterton Co-CEO Scott Dahnke trekked to the company’s headquarters in Meadville, Pa., which sits about two hours from a major airport, and was grilled for three hours by four family members and the company’s CFO. 

“It was like a political town hall for them where half of the people are progressives and half the people are conservatives,” Mr. Dahnke said. “Somehow I survived that initial meeting.” 

The family opted to sell a 42% stake at a $200 million valuation but gave L Catterton free rein to run the company. 

Ainsworth paid down debt, expanded its marketing budget and cleaned up its contracts. It broadened its product offerings and moved into new distribution channels. The company acquired Triple T Foods Inc., which had manufactured some of its products. By 2018, annual sales of the Nutrish brand had grown sixfold to $700 million.

When J.M. Smucker Co. bought Ainsworth in 2018 for $1.9 billion, L Catterton and the Lang family earned a whopping eight times their money based on the value of their stakes when the private-equity firm invested.

“It really is the American dream,” said Sean Lang, Ainsworth’s CEO when L Catterton invested.”

Incline Equity Partners – Rosenthal Wine Merchants

“For Mr. Rosenthal, a top concern was preserving his decades long relationships with winemakers in Italy, France, Switzerland and Spain.

After reviewing nine bids, including one from a bigger wine company, he and his wife and co-owner, Kerry Madigan, chose to sell a majority stake last year to Pittsburgh private-equity firm Incline Equity Partners. 

Since Incline invested, the holding company that owns Rosenthal Wine Merchant has bought one of its distributors and another boutique wine business. Mr. Rosenthal identified both of the targets but said he wouldn’t have approached them without Incline’s backing.

“For 45 years, it’s been our capital at risk,” he said.” 

The Riverside Company – Health & Safety Institute

“Bill Clendenen sold his Eugene, Ore., workplace safety company to private-equity firm Riverside Co. in 2006. In 2012, Riverside sold Health & Safety Institute Inc. to another firm, DW Healthcare Partners of Toronto, which then sold it back to Riverside in 2015. 

In 2019, Riverside sold HSI to Chicago-based Waud Capital LLC. With each subsequent sale, Mr. Clendenen has retained a stake in the company, and each time he has earned more than three times his money. The company has grown so much that the check Mr. Clendenen received from his less-than-5% stake in the most recent sale to Waud was bigger than what he and his original partner received when they first sold in 2006.

While he no longer works for HSI, Mr. Clendenen still owns a small portion of the company and expects to collect another check when Waud sells it.

“It has transformed my life and my family’s life,” he said. “A lot of people think private equity is there just to slash and burn, but this has been all about growth.”