Anacacia reap returns on Home Appliances

When Australian lower mid-market private equity firm Anacacia Capital first encountered cooking products supplier Euromaid, the pressure seemed to be about to tell. While the father of the founding Varvaressos family was keen to continue, his two sons, both in their 50s, were contemplating retirement. 

Anacacia took a controlling stake in the company and persuaded the sons to remain for at least six months. Four years on, and with kitchen utensils specialist McPherson's poised to buy the business for A$22 million ($22.8 million), the sons are still involved.

"We definitely find with family businesses that, before private equity ownership, it's quite difficult to distinguish between the different roles," says Jeremy Samuel, managing director at Australian private equity firm. "Bringing in third-party investment makes it clear what the governance structure is and it can be very liberating for the family. We strengthened the management team at Euromaid and increased the staff fivefold."

Anacacia's investment arose from a study of the Australian retail sector intended to identify where value was being generated and where most money was being made. Cooking stood out. Euromaid was chosen from more than 40 companies of reasonable size, the majority of them family-run. A dedicated holding company, Home Appliances, was set up to make the acquisition.

During its holding period, the private equity firm brought in a new CEO and expanded the product range. It also completed the bolt-on acquisition of IAG Appliances, merging the Euromaid and IAG operations under Home Appliances but retaining the individual brand names. This involved buying out Kestrel Capital's interest in IAG.

Home Appliances' revenue has more than doubled since 2009, reaching A$41.4 million in 2012. EBITDA came to A$5.5 million. Anacacia owns about two thirds of the equity in the business with the balance held by company management.McPherson's will take an 82% stake, comprising Anacacia's entire interest and a portion of the shares owned by the management and founders. The remaining 18% is still held by the latter two groups and they have a guaranteed exit in two years time through an option to convert their stake into McPherson's stock.

Anacacia will secure an IRR over 90% and a 5x money multiple on their investment. "The management and founders' exit valuation is based on the projected performance of the business so they could end up doing even better than us," Samuel adds.

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• Topics
• Australasia
• Consumer
• Exits
• Australia
• Consumer
• Anacacia Capital
• Exit