PE Profit Ladder Articles
PE Profit Ladder Market Watch Newsletter: Roark-Backed ServiceMaster Teams with Ace Hardware
Mark Twain is reported to have said, "During a gold rush, its a good time to be in the pick and shovel business." Home services is probably the biggest gold rush in US franchising at the moment. This week Roark-backed ServiceMaster announced that it struck a multi-year agreement with Ace Hardware. ServiceMaster franchisees can now buy equipment and supplies through Ace. This one is interesting because Ace outlets are locally owned and the company itself is a cooperative. Ace has made acquisitions including the Handyman Matters franchise in 2019 and a portfolio of HVAC companies in 2023. There is also private equity activity at the unit level. For example, JPB Partners owns a number of stores and consolidated additional units last year. Could this be a "try before you buy" opportunity for the Ace co-op to see what it's like to work with Roark? Will this prompt other home services franchise platforms to get more aggressive around supply chain initiatives? #bigmoneyinfranchising #franchising #privateequity
PE Profit Ladder Market Watch Newsletter: Two Roark-Backed Fitness Giants Plan to Merge
Orangetheory and Self Esteem Brands - both already backed by Roark Capital - announced their intent to merge. Once the deal closes, this will create one of the largest fitness and wellness platforms, with a combined $3.5 billion in systemwide sales, and 7,000 locations across 50 countries. It is a potential set-up to take the larger platform public, possibly in 2025. #bigmoneyinfranchising #franchising #privateequity #mergersandacquisitions #peprofitladder
PE Profit Ladder Market Watch Newsletter: Largest franchisee in the world seeks majority exit? No, it's just the 6th recap.
A great example of the PE Profit Ladder to accelerate growth. Although the press initially hinted that Flynn Group was for sale, in reality this is just a recap (the 6th)...and happens to be an excellent example of the PE Profit Ladder. Goldman Sachs Capital Parters invested from 2001-2005, Weston Presidio 2005-2011. GS returned in 2011 to invest again. The Ontario Teachers Pension Plan and Main Post along with management invested in 2014. After ten years it is time to return some funds to pension investors (OTPP and MP may roll some forward). Direct investing by pension funds and sovereign wealth funds grew 16% per year from 2009 to 2017 according to Boston Consulting Group. OTPP's good outcome here will likely inspire more direct investment in the franchise sector. But given the deal backlog we'll also see more LPs and direct investors pushing for good exits like we're seeing here with Flynn....hold times have extended and there is a bit of a backlog. This is not an exit and the management team is staying in place The existing investors are exiting and new investors are coming in. #peprofitladder #qsr #franchising #privateequity
PE Profit Ladder Market Watch Newsletter: Camp Bow Wow Acquired by PE-Backed Propelled Brands
When franchise brands sell to non-franchise strategics they often tumble back out (in a fairly predictable way) if/when the strategic's priorities change, especially if franchising is outside their core business model. Camp Bow Wow was acquired by pet hospital chain VCA back July 2014 when CBW had 152 locations...today CBW has around 230. Coming back into the franchise family and especially into a multi-brand platform will likely be very positive for this great brand! Dogtopia in particular likely benefitted from a 10 year run where CBW had 52% unit expansion under VCA while Dogtopia enjoyed 800% unit expansion during the same period. Does Dogtopia have a history of private equity support? You bet. At both the brand and multi-unit owner level. #bigmoneyinfranchising #privateequity #franchising
PE Profit Ladder Market Watch Newsletter: Carve Outs, Private Equity & Franchising
I expect to see more carveouts in 2024 as private equity firms selectively prune portfolios and look to return at least some capital to investors. Recent example - Empower Brands (backed by MidOcean Partners) sold Intelligent Office (first acquired in 2019) to United Franchise Group. #peprofitladder #mergersandacquisitions #privateequity
PE Profit Ladder Market Watch Newsletter: M&A predictions for 2024
The PE Profit Ladder will be highly visible this year! We'll see solid and largely opportunistic exits this year as PE firms seek to monetize holdings that were not ready to trade in the 2H2020-1H2022 wave. Others will make strategic carveouts from their current platform holdings, to return some capital to investors. 2023 M&A was slower as interest rates increased of course, but with better signals now there will be more movement in 2024. There is still $2.59 trillion of dry powder (per S&P Global) and a $2.8 trillion looming exit pileup (per Bain & Co.) But I predict significant activity this year will be around getting assets ready (making them as pretty as possible) for a bigger M&A push in early 2025. #PEprofitladder #privateequity #mergersacquisitionsdivestitures #wheretospendallthatdrypower
PE Profit Ladder Market Watch Newsletter: Subway Emphasizes International, Pending Roark Acquisition
The PE Profit Ladder is at work at the top end of the market as well. Predictably, Subway is focused on recruiting experienced QSR MUOs to build out international markets to off set US closures. The international opportunity is indeed tremendous. Experienced turnaround CEO John Chidsey has made good progress so far on the plan. It is interesting that in recent interviews (e.g. Yahoo Finance) he mentioned how he appreciated having no debt when privately held...which allowed him to invest in the business and do some things needed to support the brand turnaround. That will certainly change under Roark, which is likely to put a massive amount of debt on the books and take a big cash distribution within 6 months of the acquisition. #peprofitladder
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PRIVATE EQUITY’S IMPACT ON FRANCHISING
EMERGING BRANDS
TRENDS
BUILDING SMART
PROSPECTIVE FRANCHISEES
TURNAROUNDS & CASE STUDIES