Category Archives: Case Studies

06Dec/16

Airwaves Case Study

Recapitalization allows AirWaves’ to gain institutional support, and “deep pockets” to fund Growth

Overview

  • Air Waves is a leading provider of on demand apparel fulfillment for the ecommerce channel.
  • The company has developed a proprietary process for managing the complexity of “mass customization” of decorating apparel in single unit quantities.
  • The current owners bought Airwaves in 2009. By expanding offerings, investing in technology, and developing new processes Air Waves revenues grew by 500%
  • Owners desired partial liquidity, a strong Board of Directors and Funding to continue their sales growth of nearly 30 % per year.

 

 

Results

  • Recapitalization with CCCM and its affiliates completed in October 2016
  • Owners achieved their liquidity goals from the transaction
  • Management Team retains a significant minority stake with representation on the Company’s expanded Board of Directors
  • Management continues to run the Company with same leadership roles
  • Substantial investments planned in new personnel
  • Now executing their strategic plan to grow revenues by 5x through customer diversification, organic growth, and acquisitions

 

 

 

09Sep/15

QK Holdings Case Study

Leading Brand Resurgence

Overview
  • QK founded as Denny’s franchisee by Robbie Qualls and Doug Koch in 1993 with their first restaurant in Holbrook, AZ
  • QK purchases 9 units in Oregon, Dennis Ekstrom joins company as senior executive in 1995
  • QK diversifies into CSR in 2002 with an acquisition of Del Taco units in New Mexico
  • QK expands into 9 states with 88 restaurants by 2011, becoming the largest Denny’s franchisee in the U.S. with nearly $100MM of revenue and the strongest operating team in the system
  • Robbie Qualls seeks to retire and cash out in 2013 while Doug Koch wants to continue to expand the business
  • They select Cave Creek Capital as a 50% partner in a $43MM leveraged recapitalization
  • Highly complex deal closed with 79 separate LLC’s and three different corporate entities combined in hybrid stock/asset transaction; met liquidity and tax needs of the three founders
  • Founders, Doug Koch and Dennis Ekstrom receive partial liquidity for their shares and continue as senior management while Robbie Qualls remains as Vice Chairman of the Board
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Results
  • QK restaurant base grows by 15 units and Denny’s brand surges under new corporate leadership, with run rate revenues growing nearly 30% within two years
  • Record comp store growth of nearly 10% for 2015
  • EBITDA grows almost 50% since the aquisition
  • Substantial progress in building infrastructure; CFO hired, first audit and consolidated tax return
  • Restaurant industry in general and Denny’s, in particular, continues strong resurgence in performance and valuations under CEO, Jon Miller

 

09Sep/15

Transnational Case Study

Attracting Blue Chip Clients

Overview
  • Marcelo Young, executive for a multi-national food company based in Argentina, identifies need for value-priced brand-equivalent food items by U.S retailers
  • Transnational founded by Marcelo Young in Miami in 2002 and gains rapid penetration in Dollar Store channel just as they begin expanding food offerings
  • During Recession of 2008-09, U.S retailers expand value brand offerings and TNF is well positioned to grow as consumers shift towards value priced private label/National Brand Equivalents
  • TNF adds WalMart as a customer in 2010 and grows rapidly to 200 SKU’s
  • Marcelo Young wins E&Y Entrepreneur of the Year Award in 2015 as Company nearly doubles sales in four years
  • Management seeks capital partner to expand board, provide liquidity to shareholders and strengthen balance sheet for further growth
  • TNF selects Cave Creek Capital to lead majority recapitalization based on its track record of success in Founder Led Growth Recaps

 

Results
  • Transaction closes in July 2015
  • Management cashes out minority shareholders, gains personal liquidity and establishes a larger ownership stake for the management team
  • Strategic Plan targets 200% sales growth in five years through both organic growth and acquisitions

 

 

13Dec/12

VMC Case Study

Management Buyout Results in Team Owning Majority Stake

Overview
  • VMC purchased from Aeroflex, Inc., was a leader in providing vibration isolation and seismic control solutions to the industrial, military and construction markets
  • Purchased for $8.6 million in 2005 by Management and CCCM
  • Management maintained control of Board and majority ownership with a $1 million investment alongside $3 million mezzanine investment
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Results
  • Revitalized management team and workforce produced dramatic improvements
  • Sales and ebitda grew more than 250% within three years
  • Acquired competitor Amber Booth in 2007
  • Management recapitalized the mezzanine debt and equity with Fifth-Third Bancorp in 2009 at an 8x markup in equity value
  • VMC makes strategic acquisitions in 2015; AAC of New York and Dynamic Control Labs in Reno, NV establishing leadership in online sales and testing and certification for compliance with the International Building Code
  • $32 million minority recapitalization completed in May 2015 in conjunction with new partner Seacoast Capital and East West Bank refinancing the Senior Debt

 

13Dec/12

Bastech Case Study

Leveraging Technology to Expand Into New Markets

Overview
  • Company founded in 1961 and profitable every year
  • Proprietary products drove strong customer relationships and recurring revenues
  • Founder limited growth to a lifestyle business resulting in low penetration of a large potential market (100+ U.S. pulp mills and untapped mining market)
  • Attractive EBITDA margins
  • Management buyout completed by Former Dow Chemical executives with The Courtney Group and Cave Creek Capital in August 2007
Results
  • Substantial investment made to expand Company’s facilities, marketing, and administrative systems
  • Hired additional Senior Executives; tripled existing team
  • Expanded R&D programs with several existing products and several under development
  • Expanded mining effort to become leader in US phosphate mining sector
  • Launched international sales effort
  • Sales have grown 300% since closing
  • Customer base has increased 400%
  • Cash Flow (EBITDA) has increased over 100% in four years
  • Recapitalized Senior and Subordinated Debt with SunTrust in February 2012
  • Management team expands in conjunction with debt recapitalization in 2014
  • Lower leveraged company continues to to invest in paper/pulp and mining markets
  • Expansion into international markets with joint ventures with major chemical companies attracted by Bastech’s technology

 

13Dec/12

Kenexa Case Study

Culture of Excellence Drives Billion Dollar Exit

Overview
  • Founded as an executive recruiter, in the late 1980’s
  • Developed the “Hire, Train, Retain” outsourced human resources model
  • Purchased several companies in targeted areas; multiplied the sales post-acquisition by cross-selling to Fortune 500 customer base
  • Rapid growth attracted national attention, including membership in the INC 500 and E&Y Entrepreneur of the Year
  • In 1998, Co-Founder, decided to retire and sell his shares
  • Kenexa’s success in several business lines; online surveys, training and recruiting; required additional investment in product development and marketing
  • A Private Capital partner was chosen (in lieu of an IPO) to assist in the funding of Kenexa’s needs in a multi-level recapitalization
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Results
  • $27 million of Equity Capital from institutional investors in 1999
  • Repurchased $8 million of stock from the retiring Founder and funded expansion of new product offerings
  • Refinanced a stringent asset-based bank loan
  • Board of Directors expanded, existing management retained control
  • Financing partners added a critical capital “cushion” in 2001 downturn
  • Business model shifted successfully to recurring contracts SAS model software, supporting outsourced hiring and retention programs
  • Completion of IPO on June 29, 2005 at $12/share, rose to $38/share in 2007
  • Sold to IBM for $46/share ($1.3 billion) in August 2012, 12X original purchase price

 

13Dec/12

Liberty Distribution Case Study

Recapitalization lets Liberty’s founder take money off the table, share equity with the management team, and build a balance sheet for growth

Overview
  • Liberty pioneered the direct-to-store distribution of confections and snacks to the check out aisle for non-food retailers in 1998
  • Company had achieved sales of over $40 million by 2007
  • Founder desired liquidity to diversify net worth but wanted to remain with the Company and give his Senior Team equity in the transaction
  • Recapitalization with CCCM completed in 2008 with management owning over one third of the equity
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Results
  • Capital facilitated future growth in plant capacity and sales
  • Hired additional senior executives to augment team
  • Significant ownership/incentives for highly motivated employees
  • Enhanced management information/sales systems to monitor progress and pursue more prospective accounts
  • CCCM assisted in execution and funding of acquisition of major competitor
  • Expanded customer base and market share- sales increased 400% in four years
  • Industry leadership position was significantly enhanced
  • Recapitalized in 2010 allowing management to repurchase majority stake and CCCM garnered a return of 4.3X the original investment
  • Sold to Vistar Inc in June 2012 at a price of nearly 8X CCCM’s original price