Unleashed Brands sells majority stake to PE firm
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.