Multi-Unit Franchisee Magazine Issue II, 2011 | Page 59

ing their organization for a sale when the economy recovered. What are the upsides?
Their time is now, say experts. Multiples are rising, but not to Private equity is a tool that can be used for many reasons: exit/
succession, partial exit, strategic acquisitions, to
the excessive levels of the boom years, making
meet a development schedule, remodeling, or
the current environment a potential win-win opas the answer to a distressed operator’s prayers.
portunity for both sellers and buyers.
For the right operator at the right time, it can
A growing understanding on both sides of
bring many advantages.
the buy-sell equation—private equity “getting
“You get people who understand professional
it” about franchisees, and operators educating
management and in many cases are finance exthemselves about the private equity market—
perts who will work with your CFO to use capicombined with the “perfect storm” of pent-up
tal efficiently,” says Dennis Monroe, cofounder
capital seeking investments and operators seeking
and chair of law firm Monroe Moxness Berg.
capital for growth as the economy tilts upward
“In many cases these are smart people, so their
for the first time since 2008—looks to make 2011
management input is good.”
an exciting year in the multi-unit franchising
“Private equity firms generally are smart, soarena. Here, in FAQ form, is what our ad hoc
phisticated, knowledgeable, and tend to bring with
panel of experts has to say about the year ahead Dennis Monroe
for multi-unit franchisees considering taking on
them operating partners,” says Cheryl Carner,
who joined GE Capital, Franchise Finance as
a private equity partner, or simply selling out
senior vice president, private equity originations
and heading for their favorite fishing hole, golf
course, or new venture.
in June 2010. “A private equity firm has better
access to capital—their own, and the ability to
What is private equity?
get debt—to grow and remodel more easily than
Private equity is a “hodgepodge,” says Harry
a smaller, individual investor.” And, for the franLoyle, managing director of Cybeck Capital
chisee, she adds, “Where a private equity firm is
making an investment on other people’s behalf
Partners, and it comes in all shapes and sizes.
and is accountable to other investors, it sets the
The simple definition, he says, is “private money
bar even higher.”
that involves equity transactions, but under that
there all kinds of opportunities.”
“Efficiencies of scale with a private equity
“Private equity comes in a myriad of forms, cheryl carner
group equals access to greater resources, profesfashions, and has different criteria important to
sional or legal advice, synergies, IT, and shared
them,” says David Stiles, senior vice president at Trinity Capital, services across different businesses or restaurant companies,”
which recently served as financial advisor to multi-unit firm says Rick Ormsby, a partner at NDA Inc., an investment bankBreads of the World in its sale of 20 Panera
Bread restaurants in Ohio to Covelli Enter- u.s. Private equity Deal Flow by Year
prises. “There are private equity interests out
there to match whatever you require.” And it
can take on lots of different forms, depending
on the agenda of the multi-unit franchisee.
In terms of scale, most franchisee deals
are small potatoes in the private equity world.
From the $1 million or less that Cybeck
provides (see page 62), it’s not uncommon
to see private equity deals in the hundreds
of millions and well into the billions. And
franchisee companies have been involved in
larger deals over the years. The largest now
in the news would involve Goldman Sachs’s
GS Capital Partners buying Apple American
Group from Weston Presidio Capital for what
likely will be several hundred million dollars
if the deal closes. Apple American owns and
operates about 270 Applebee’s and reported
Source: PitchBook, AnnuAl PrivAte equity BreAkdown 2011
sales of $665 million in 2010.

Multi-unit Franchisee Iss u e II, 2011

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