IVEST’s acquisition of Care Bears rights is a ‘rare opportunity’ for private equity

IVEST Consumer Partners is announcing this morning that it has snapped up the licensing rights to popular children’s franchise Care Bears via its acquisition of parent owner Cloudco Entertainment for $100 million.

The deal arguably couldn’t come at a better time for toys. Witness the summer box office success of Barbie, which has racked up over $1.2 billion worldwide and has become Warner Bros’ highest-grossing movie, underscoring the big appetite for women and girl-related content and also the marketing power of a beloved toy franchise.

“It’s better to be lucky than smart, right?” quips George Jones in an interview with PE Hub. Jones is the co-founder and managing partner of IVEST, which was founded in 2013 and targets the niche consumer and licensing products sector.

“We had no idea about the Barbie thing,” he tells PE Hub, when talking about the phenomenal success of the movie, which reimagines the iconic doll as a real-life woman through a feminist lens. “Living in that world, we thought Barbie would be big. No one expected it to be as big as it is.”

It’s a remarkable coincidence, for sure, but one that Jones is more than familiar with, having served as president of Warner Bros Global Consumer Products and Licensing at a time when the studio scooped up the licensing rights to then unknown author JK Rowling’s first three Harry Potter books. And this was right before the Harry Potter series would explode into the stratosphere to become the hugely popular franchise it has since become. Synchronicity or just plain dumb luck, you decide.

In a similar vein, Jones and his colleagues at the Los Angeles and Canadian buyout shop are betting big on Care Bears’ already established broad appeal and the values it propagates – caring and sharing – to follow precedent and rake in serious coin. Not that it already hasn’t.

Originally created by card company American Greetings, the Care Bears are a set of characters that have become a sensation, appearing in a wide array of formats, ranging from toys to TV and film animation. It was spun off by American Greetings in 2018 after the owners, the Weiss family, sold it to Cloudco.

“For us to be able to buy it is a rare opportunity,” says Jones. “This is one that has been around for 40 years. It’s one of the best-selling properties in retail. Usually what happens with a property like this, it goes on the market, and it’s snapped up by entertainment companies or toy companies and they pay a lot for it.”

That latter scenario was not warmly embraced by the management team, which feared that an entertainment or toy company could merge Cloudco with its existing operations, according to Jones. The seller, the Weiss family, assured management that would not transpire and they would have a say in selecting the buyer. Enter IVEST, courtesy of Intrepid Investment Bankers.

The mid-market bank was no stranger to IVEST having represented the sellers of Entertainment Earth, a distributor and online retailer of licensed merchandise and entertainment-based products, which IVEST acquired last year. When word came that Cloudco was on the block, Intrepid brought it to IVEST’s attention late last year. The synergy was perfect.

“They knew we had the background relevant to this company,” recalls Jones. “They thought we were the right fit.” (In addition to Entertainment Earth, IVEST’s current investments include UK-based Paladone, a licensed products business and Dan Dee, a seasonal plush company headquartered in El Segundo, California.)

Cloudco’s management team agreed, and a deal was inked.

Unfortunately, it didn’t come without snags. Current market conditions aren’t exactly conducive to dealmaking. Yet even with this challenge, IVEST was able to find financial partners that could work with their projections. Most notable among them was BankUnited, which was the debt provider.

“We had over 10 lenders that wanted to do the deal,” says Jones. “People saw this was an exceptional deal. That was a big factor. But BankUnited really stepped up.”

Placement agent Triago raised the capital for the deal while Raymond James served as debt advisor and Intrepid provided financial advice.

Another big plus in IVEST’s favor was the nature of the deal itself.

“With Cloudco, most of their revenue is generated from IP,” explains Jones. “They have very high margins and do not require a lot of fixed assets. If a company is fortunate enough to have a classic evergreen property in their IP portfolio, as Cloudco has with Care Bears, it will continue to provide dependable revenue stream at high margins for many years to come.”

Rather than rest on the laurels of the acquisition itself, IVEST has big plans for Care Bears. They include monetizing new and existing brands as well as incubating new content and IP as well. Also topping the to-do list are acquisitions and licensing opportunities.

“We have already identified a list of properties that are potential targets and now, using Cloudco as a platform, we will begin to explore those opportunities,” adds Jones. “We think we’re very well positioned to add value and mitigate risk at every level of the business to support management and ensure successful execution of their growth thesis.”