Consumer-focused private equity investment firm Brentwood Associates sold Pacific Island Restaurants Inc. to Nimes Capital last week, reported The Daily Journal. Honolulu-based Pacific Island Restaurants is the sole franchisee of Pizza Hut and Taco Bell restaurants throughout Hawaii, Guam and Saipan. The deal closed at the end of December, eight years after Brentwood purchased the company. Terms of the deal weren’t disclosed.
Brentwood’s managing director, Rahul Aggarwal, called the transaction a “successful investment,” reported The Daily Journal’s Connie Lopez. During the time Brentwood owned Pacific Island Restaurants, the company implemented call centers in the Pizza Hut system, opened six new restaurants and acquired six more.
2012 was a busy year for Brentwood Associates. In addition to selling Pacific Island Restaurants, Brentwood sold three other portfolio companies: Array Marketing Group, Filson Holdings and Ariat International.
Private equity fundraising lost some of its sparkle in the third quarter, according to Buyouts editor Greg Roth. U.S. pension funds, endowments and other limited partners all have began to pull back in the wake of renewed market upheaval and the possibility of a double-dip recession. What this means, according to private equity executives and placement agents, is the likelihood of intensifying competition for a shrinking pool of money.
That could ultimately lead, they say, to a bitter reckoning for a growing number of firms as the money that these firms hoped to raise simply isn’t there. If the trend holds, greater competition for less money could also foreshadow cuts in revenue and employment at private equity firms, and further tilt the balance of power between LPs and general partners—as far as terms and fees—more squarely in favor of LPs. Despite the third quarter slump, the fundraising market this year still has a solid chance of surpassing the depressed amounts raised in 2009 and 2010. Indeed, by recent historical standards, current fundraising levels are a mere fraction of what they were prior to the financial crisis.
“I get the feeling that investors are getting a lot more careful,” said Bill Barnum, a partner at Brentwood Associates, a middle-market buyout shop in Los Angeles that anticipates raising its next fund within a year. “And it’s probably going to be even worse in the fourth quarter. A lot of LPs are out of money by the end of the summer. In the end, that probably makes fund sizes a little smaller and the fundraising process a little longer. And at the margin, it will probably squeeze some people out as well,” he said.
K-MAC Holdings Corp. announced today that it has acquired No Limits, LLC, a Missouri-based Taco Bell franchisee that owns and operates 25 Taco Bell restaurants. K-MAC is one of the largest Taco Bell franchisees in the U.S. and also operates KFC and Golden Corral restaurants. It currently operates 237 restaurants across the three different brands.
K-MAC is owned by Brentwood Associates, a leading Los Angeles-based private equity investment firm, which made its initial investment in K-MAC in March 2011. “This acquisition allows K-MAC to extend its reach and propel its growth,” said Brentwood Associates Managing Director Rahul Aggarwal. Brentwood Associates’ other portfolio companies in the restaurant industry include Pacific Island Restaurant, Zoe’s Kitchen and Veggie Grill.
Brentwood Associates, the Los Angeles-based private equity firm, plans to triple or quadruple the volume of Sundance Catalog, a company it acquired earlier this week.
Sundance Catalog, the company’s main business, is a multichannel direct marketer and specialty retailer with current annual sales estimated at $150 million. Women’s Wear Daily reports that selling shareholders, including ACI Capital and Webster Capital, will retain a minority stake.
“We’re looking for significant growth,” said Eric Reiter, a partner at Brentwood Associates. “The opportunity to grow catalogue sales, e-commerce and retail is huge. When you get the retail machine working, there’s significant growth potential. It has the potential to really scale as a business.”
Sundance Catalog was launched in 1989 by Robert Redford. It grew out of a small general store at the base of Sundance Village, the community Redford founded in 1969 to foster artistic pursuits while preserving the land in Utah’s Wasatch Mountains. Sundance Catalog currently operates stores in Corte Madera, Calif., and Denver.
“There’s clearly an opportunity for 15-plus stores over next couple of years,” Reiter said. “Our customer exists across the country. There’s a big incentive to make retail work because multichannel shoppers are the biggest spenders. We’re also going to find new ways to reach our potential customer such as social media. The brand is global,” he said, adding that Sundance could expand internationally.
Second quarter private equity fundraising in the United States had its strongest period since the third quarter of 2008. Totals so far this year have been so strong that if year-to-date figures were to continue into the second half, they would lift the industry to its first $100 billion-plus year since the golden era between 2005 and 2008, reports Buyouts magazine.
“[Pensions] are back in the market, and more aggressive than they have been,” Bill Barnum, partner at Los Angeles-based Brentwood Associates, says in the article. “There are a lot of exits by GPs right now, and these distributions are creating a virtuous cycle, giving investors the ability to reallocate capital.”
Brentwood Associates is looking to start raising its fifth fund later this year.
Brentwood Associates partner Bill Barnum discussed his firm’s unique investment strategy and how it has paid off for investors in a recent interview with Pensions & Investments.
Barnum explained the firm raises a new fund about every six years, compared to every three to four years for other private equity firms. And, rather than expanding into other alternative investment asset classes, Brentwood is focused on private equity investments in consumer brands.
“We look for businesses that have specific characteristics, including high consumer satisfaction and perhaps most importantly, significant customer loyalty,” Barnum says in the article.
The M&A Advisor will be hosting its annual “40 Under 40 – West” gala next week, and in honor of the event, this year’s winners were interviewed for a recent Alerts newsletter.
“One of the most gratifying aspects of being in the private equity business is working side-by-side with companies to help them grow and create new opportunities for people,” Rahul Aggarwal, Managing Director at Brentwood Associates and one of this year’s winners says in the article. ”I enjoy taking ideas and capital and working with great people to turn ideas into real accomplishments.”
See full list of The M&A Advisor’s 2012 “40 Under 40 West Coast Awards” winners