Deal Scoop: Olympus Sells K-Mac To Brentwood Associates

After nearly seven years, Olympus Partners has sold K-Mac Holdings, which is the third largest Taco Bell franchisee in the U.S.

Stamford, Conn.-based Olympus Partners, a middle market PE firm, did not reveal financial terms. Olympus did sell its majority stake in K-Mac, making an eight-time return on its equity investment.

The transaction closed late yesterday, says Paul Rubin, an Olympus partner, who declined to comment on the buyer.

Brentwood Associates, a Los Angeles PE firm, plus some coinvestors, are the unnamed acquirers of K-Mac, another source familiar with the transaction says. An announcement is expected later today.

“The deal has been a very successful investment for us,” Rubin says. “We thought it was a good environment to sell a consistent performer.”

Officials for Brentwood could not be reached.

Olympus bought the stake in K-Mac, which had 144 stores, in December 2004. The investment came from Olympus’s fourth fund, which raised $750 million in 2003.

K-Mac now operates 167 Taco Bells, mainly in the Southwest. It also owns KFC and Golden Corral restaurants, bringing total stores to 190. K-Mac produced about $250 million in 2010 sales, Rubin said.

Four months ago Olympus began the process to sell the Ft. Smith, Ark. franchisee. It hired Bank of America Merrill Lynch to run the auction. There was much interest in K-Mac, Rubin says.

Quick-serve restaurants, like Taco Bell, endured the economic downturn well, he says. “Taco Bell as a brand is extraordinary,” he says.

Rubin and Arjun Bhattacherjee led the deal team for Olympus. Lyle Wilpon, James Rourke, James Patterson, and Daniel Zarkowsky of Bank of America Merrill Lynch advised K-Mac and Olympus