- In advanced discussions with several targets as it eyes next platform buy
- Considering raising fresh capital in next 12-18 months
- Engenuity Outdoor Equipment, Due North and Komline seeking add-ons
Mid- and lower mid-market investor Ronin Equity Partners plans to make at least two new platform acquisitions in the next six to eight months, as it continues to implement its operational, primarily North America-focused consumer and industrials strategy, Managing Partner David Feierstein told Mergermarket.
The New York City-based sponsor, which focuses on companies with USD 3m-USD 100m in EBITDA and enterprise values of USD 25m-USD 1bn, is currently “very advanced on multiple different assets,” said Feierstein.
Ronin also has a letter of intent out for a “sizeable add-on” for one of its platform companies, which would represent its first acquisition in Europe, he added.
Meanwhile, Ronin could also make its first exit this year, with some of its investments having progressed to the point where the sponsor is considering whether a sale could make sense, said Feierstein.
David Feierstein, managing partner at Ronin Equity Partners
As previously reported by Mergermarket, Ronin portfolio company Heartisan Foods, a speciality cheese business, is currently exploring a sale via investment bank Intrepid.
To date, Ronin has made a total of 23 acquisitions across five platform buys. It splits its focus 60/40 between industrials and consumer opportunities, he said, noting that it is spending significant time currently – but not exclusively- on potential investments in the food and beverage, electrical, water, telecom, engineered products, fire and life safety, elevator maintenance, and aerospace aftermarket sectors.
Heinz roots
While Ronin Equity Partners was formed in 2020, the roots of its team and investment approach can be found further back in time. Feierstein left Goldman Sachs’ private equity arm in 2013 to join Heinz, shortly after its buyout by 3G Capital. Ronin’s roots can be traced back to the Chicago-based food company; Feierstein was the global head of zero-based budgeting (ZBB), the aggressive approach to cost-cutting that the Brazilian-founded private equity firm was renowned for. Four other members of the Ronin team held senior finance and operational roles at Heinz. In one year, Heinz’s costs had been reduced by 31% and working capital needs by 113%.
The initial success of 3G’s cost-cutting at Heinz drew widespread media coverage, helping to build Feierstein and his team’s reputations just as they were ready to find another private equity partner and another deal to participate in.
After leaving the company after the Kraft-Heinz merger, the initial focus was minority investments representing 5-10% of larger private equity deals. Bringing external family office investors on board, Feierstein and the team participated in Blackstone’s [NYSE:BX] PIPE investment into Atlanta-based ATM-maker NCR in late 2015. In 2017, they co-invested in Bain Capital’s USD 3.2bn carve-out of Diversey from Sealed Air.
Blackstone invested USD 820m in NCR in 2015 and exited in a series of transactions for USD 1.29bn, bringing a 58% return. Bain exited Diversey last year in a USD 4.6bn sale to Platinum Equity-backed specialty chemicals producer Solenis.
Family office know-how
Since 2021, Ronin has deployed more than USD 350 million in equity – a mix of permanent capital and co-investment capital – primarily from family offices, including Stephens Capital Partners, Northwood Ventures, Knott Partners, Cherng Family Trust, Landon Capital, Satori Capital, First Haven Capital, Sope Creek and Cardinal Equity, as well as from asset managers, including Northleaf Capital Partners, Nicola Wealth and Fiera Comox.
Ronin typically makes two new platform deals per year, deploying USD 50m-USD 100m of equity for each on average, meaning USD 100m-USD 200m of equity in total per year. It is looking to deploy around USD 150m-USD 200m in the next eight months and could look at another fundraise in the next 12-18 months, according to Feierstein
“We are more flexible than you’ll see typically seeing because many of our LPs are large family offices, which generally have longer-term hold requirements,” said Feierstein, who first began working with family offices during his time at Goldman Sachs. “We don’t have some of the restrictions that come with a more traditional private equity fund, such as concentration limits. We can do big and small deals, without restrictions or limitations.”
Ronin now focuses exclusively on control investments in middle- and lower-middle-market companies.
The reasons for this shift were twofold: the backing of Ronin’s family office investors and an expected greater impact for the team’s operational expertise, on smaller companies.
“We made a lot of money doing this for our investors, who said, we’ll give you more money to go do your own control buyout deals,” said Feierstein. “But the bigger reason is what we do operationally is so much more impactful in middle market and lower middle market companies, and even more so in family and founder-owned companies.”
Acquisition playbook
Ronin’s acquisition playbook often sees it acquire several companies at once to speed up synergies from cross-selling and cost-savings.
“A roll-up strategy over several years in certain fragmented sectors is way too slow for our operating model,” Feierstein said. “We’ll instead try to put multiple companies together, either immediately or fairly imminently. This gives us some synergies both commercially from cross-selling, as well as on the cost side. And our team at Ronin will manage entirely what ends up being an incredibly complicated integration on the company’s behalf in our embedded operating model.”
This strategy has been executed for each of its platform investments. In March 2021, Ronin announced the acquisition of Peapack, New Jersey-based designer and manufacturer of water filtration and pollution control systems Komline-Sanderson, with five add-on acquisitions subsequently announced within the following ten months. The combined company is expected to generate around USD 195m and USD 33m in EBITDA for 2024.
Heartisan Foods followed in June 2021 via the merger of three specialty cheese businesses. As previously reported, the business, whose biggest brand is Red Apple cheese, is being marketed off EBITDA of just under 10m for its sale process.
In September 2021, Ronin announced the simultaneous acquisitions of QBD and Minus Forty, two manufacturers of commercial refrigeration equipment, to form a business now known as Due North, which has expected revenue of around USD 138m and expected EBITDA of around USD 40m for 2024.
In July 2022, it combined three outdoor power and trailer equipment businesses to create DK2, rebranded earlier this year as Engenuity Outdoor Equipment. The company is expected to generate around USD 60m in revenue and USD 8m in EBITDA this year.
Ronin’s last platform investment was announced last April with the combination of six beverage processing equipment businesses to form Lotus, which is expected to generate around USD 40m in revenue and approximately USD 9m in EBITDA for 2024.
Although this approach comes with greater integration risk, Ronin is comfortable taking this on since it deploys a proprietary execution playbook to manage the integration centrally, said Feierstein.
Ronin tends to finance its deals conservatively. “For some smaller deals, we will do them entirely via equity to get them done faster and then recap later,” said Feierstein.
It has used revolving credit lines to fund add-ons for its platform buys; for example, Heartisan Foods’ acquisition of North Country Packaging in September 2023, and Engenuity Outdoor Equipment’s acquisition of Woodmaxx in March 2024.
Ronin is looking at further add-ons across its existing platforms, in particular Engenuity Outdoor Equipment, Due North, and Komline, said Feierstein.
Ronin sources its deal flow from direct outreach to founders, making about 20-30 calls a week, as well as from a network of more than 150 operating advisors with experience across the industrials and consumer sectors. It also sources opportunities from investment banks, from “Goldman Sachs and JP Morgan all the way down to two guys in a garage,” said Feierstein.
Embedded operating model
The sponsor’s main differentiator is its operating model, which sees Ronin’s deal team embedded into the companies it buys for six months to a year as senior executives to work directly with management teams on a day-to-day basis.
“Everyone in my team, including myself, has a hybrid investor/operator background,” said Feierstein. “We’ve spent a decade of our careers in traditional private equity and investment banking, then we’ve followed that with a decade is senior executive roles at some larger businesses.”
This sees the most senior team member act as interim CFO, with all back-office functions reporting to them, including HR, legal, communications, back-office sales operations, and finance. It leaves front-office operations alone but leans on its network of operating advisors, who typically have front-office expertise and can help fill gaps when required.
“We actually deploy and embed our own deal team directly into every company we buy, as senior interim executives, for at least a minimum of about six to 12 months,” said Feierstein.
Ronin has developed its model over the course of more than a decade at both large and small companies. Starting at Heinz, the team began to develop the execution playbook, which it then test-ran at NCR and Diversey.
“Post-close, we embedded ourselves into NCR as senior executives reporting to the CEO for 18 months,” said Feierstein. “It was exactly what we were looking for because we could prove we could take cost out of the business and really recharge the company’s growth in the process.”
Working with Bain at Diversey, it expanded its playbook across different back-office functions. Ronin now runs this playbook, which focuses on introducing automation, among other measures, to improve back-office infrastructure at every company it buys. Over time, the team has honed its playbook, so much so it is now able to execute it in a six-to-eight-month timeframe, with automation a central facet of the process.
“What that required us to do was to pre-build all the IT systems we might use in any company offline,” said Feierstein. “This means we can lift and ship all that code configuration into any company we buy. That’s allowed us to automate a lot of what we might have historically been doing manually.”