Did you see the post on CheerWatchDog.com regarding Varsity Brands Inc. (VBI) is for sale as advertised through RR Donnelley a well-respected private equity firm on March 28, 2011?
http://cheerwatchdog.org/2011/05/22/varsity-rumor-varsity-for-sale/
Private Equity Firms create a market for Companies/Corporations who are in the market to sell their business to new investors and in this case, the advertisement suggests the company will sell for approximately $360 million, or 8 times 2010 EBITDA of $45 million. In 2003, last time VB was sold, Leonard Green and Partners LP took the firm private (no longer trades on public markets) for $130 million.
What will be the potential impact without Leonard Green and his leadership team as THE driving force for growth of VBI and Cheer? Usually in Corporate sales the next Investor/Owner will desire to create higher current rates of return by replacing Senior Management with their own leadership or altering business focus in the near future if not immediately to squeeze more profit from the revenues. New Management at VBI could represent some shock waves or other unintended consequences in the Cheer industry! Who will remain, will Jeff Webb retire, what will the direction of VB become under new management and how many current Senior Managers could be replaced? Where is the business growth opportunity? So many questions for the future, and if you are a business closely attached to the VBI profit model how will any changes in their business impact you? If you did NOT know they were for sale, why not?
How many of you reading this would accept purchasing a company for $130 million in 2003 then selling it again in 2011 for $360 million representing a $230 million growth over 8 years? When you run some very simple math calculations on the company that represents a 176.9% total return, assuming the sale at $360, which annualizes to a 22.1% growth rate over 8 years. Although the change in ownership is apparently imminent, they are respectable returns to most investors. How many Individual or Institutional investors today would love to have experienced 22.1% per year for the past 8 years? As an example if you invested $130.00 in 2003 ... today it is worth $360.00 with gains of $230.00, so now you can do the math by placing say $130,000 in 2003 you would currently have a value of $360,000. With these impressive returns, why would Leonard Green and Partners LP consider selling VBI? Could be Leonard Green and Partners LP are monitoring the trends in VBI’s business model which currently represent a business which has reached maximum penetration of the US market with only limited success in International markets, or the opportunity to squeeze profits from the current business don’t represent the potential returns they desire. What do you think?
So many questions, so little time and so few answers!
http://cheerwatchdog.org/2011/05/22/varsity-rumor-varsity-for-sale/
Private Equity Firms create a market for Companies/Corporations who are in the market to sell their business to new investors and in this case, the advertisement suggests the company will sell for approximately $360 million, or 8 times 2010 EBITDA of $45 million. In 2003, last time VB was sold, Leonard Green and Partners LP took the firm private (no longer trades on public markets) for $130 million.
What will be the potential impact without Leonard Green and his leadership team as THE driving force for growth of VBI and Cheer? Usually in Corporate sales the next Investor/Owner will desire to create higher current rates of return by replacing Senior Management with their own leadership or altering business focus in the near future if not immediately to squeeze more profit from the revenues. New Management at VBI could represent some shock waves or other unintended consequences in the Cheer industry! Who will remain, will Jeff Webb retire, what will the direction of VB become under new management and how many current Senior Managers could be replaced? Where is the business growth opportunity? So many questions for the future, and if you are a business closely attached to the VBI profit model how will any changes in their business impact you? If you did NOT know they were for sale, why not?
How many of you reading this would accept purchasing a company for $130 million in 2003 then selling it again in 2011 for $360 million representing a $230 million growth over 8 years? When you run some very simple math calculations on the company that represents a 176.9% total return, assuming the sale at $360, which annualizes to a 22.1% growth rate over 8 years. Although the change in ownership is apparently imminent, they are respectable returns to most investors. How many Individual or Institutional investors today would love to have experienced 22.1% per year for the past 8 years? As an example if you invested $130.00 in 2003 ... today it is worth $360.00 with gains of $230.00, so now you can do the math by placing say $130,000 in 2003 you would currently have a value of $360,000. With these impressive returns, why would Leonard Green and Partners LP consider selling VBI? Could be Leonard Green and Partners LP are monitoring the trends in VBI’s business model which currently represent a business which has reached maximum penetration of the US market with only limited success in International markets, or the opportunity to squeeze profits from the current business don’t represent the potential returns they desire. What do you think?
So many questions, so little time and so few answers!
