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Unleashed Brands sells majority stake to PE firm

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Illustration: Sarah Grillo/Axios

Unleashed Brands, a platform for experiential brands that foster youth development, sold a majority stake to PE firm Seidler Equity Partners, the company's CEO Michael Browning tells Axios exclusively.

Why it matters: Leveraged buyouts by PE firms of retail concepts have become an endangered species in recent years, even as they have thrived in other sectors.

  • Browning declined to comment on the enterprise value but said the valuation multiple was close to the estimated range he gave Axios last May, implying a deal worth around $1 billion or more.

Details: Selling shareholders are PE firms AHR Growth Partners, Mantucket Capital and MPK Equity Partners, Browning says.

  • All three firms are completely exiting their investment at a return in excess of 10X invested capital, he says.
  • After Seidler, Browning is the next largest existing shareholder, and then management.
  • Investment bank Harris Williams, specifically managing directors Ryan Budlong and Brent Spiller, ran what Browning described as a competitive auction.
  • The deal was financed with a combination of debt and equity, Browning says.
  • The company's CFO Scott Perry and Seidler put together the debt financing package, though the CEO declined to comment further.

By the numbers: Unleashed Brands plans to grow 26% this year after achieving its plan for 2022, Browning says.

  • He told Axios last year that the company would generate system-wide sales of approximately $740 million, revenue of about $160 million, and EBITDA of around $70 million.
  • As noted above, though Browning could not comment on the specific valuation, he said it was very close to the multiple range for similar asset-light businesses, which is between the high teens and low 20s.
  • On the low end, 16X EBITDA of $70 million equates to an enterprise value of about $1.1 billion.

Catch up fast: Axios reported Unleashed Brands was putting itself up for sale last May, when it began interviewing investment banks to run the process.

What's next: With a new PE backer, Unleashed Brands is on the hunt for acquisitions.

  • Seidler will help source deals, conduct due diligence, and provide financing for the transactions.
  • The company is looking to buy best-in-class brands in music, swimming, after school child care, and traditional sports.
  • Unleashed can plug any sized brand into its platform, Browning says.

Between the lines: The company's new private equity backers will propel the franchisor's next growth phase and eventual exit, which could entail an IPO, Browning says.

  • Seidler says the company is already IPO ready.

The intrigue: Given the demand for experiential retail in shopping centers such as malls, Browning says there is a lot of white space.

  • Just as Unleashed Brands took on a lot of the leases of Toys "R" Us when it closed its stores, Bed Bath & Beyond's store closures provide a real estate opportunity, he says.
  • The company studies companies such as Driven Brands, Inspire Brands and Authentic Brands Group as it thinks about its own strategy.
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