With a portfolio of 18 existing brands like Ellen Tracy, Bob Marley and The Sharper Image, Berk is looking to buy. “We want sustainable consumer brands,” says Berk, who was phoning from the Denver International Airport.
Hilco is looking for deals in the healthy food sector, specifically institutional and educational food services. Berk also likes the educational technology market, as well as consumer package goods within the Hispanic sector. Berk wouldn’t name any particular Latino packaged goods company that he favors, but says that if properly marketed and supported such a company “could cross over into the general market.”
Berk adds that Hilco Consumer is also a seller, with plans to shed some of its existing portfolio within the next six to 12 months. In April, Hilco sold Tommy Amour brand to Sports Authority.
Hilco’s hold period is typically three to five years, but Berk says the motivation to sell is not tied to that time frame. “We are now assessing the lifespan of those portfolio items,” he says. “When the time is right, and they have the proper equity values, we would definitely sell.”
The PE overhang has caused multiples in various sectors, like industrials, to pop. Consumer is also seeing an increase in activity with multiples ranging from 4x or 5x Ebitda (the low end), to 6x at the mid tier while technology sector firms could sell at as high as 12x to 16x multiples.
While multiples are rebounding, Berk doesn’t think the recessionary mindset is over yet. “Every time we hit a bump, everyone braces for what could be a downturn,” he says. “I don’t think we’re out of it now.”
Hilco Consumer Capital is part of Hilco Trading, the holding company which has $1 billion in revenue assets. Other divisions include Hilco Corporate Finance and Hilco Industrial.
Hilco Consumer Capital, though it is a private equity firm, doesn’t have a fund. It operates on an investment basis with its limited partners. However, Hilco Consumer Capital does have its own corporate money (Berk wouldn’t tell us how much) and invests in every deal alongside its LPs. Typically, if Hilco Consumer Capital finds a company it wants to invest in, it will present the opportunity to its LPs. “We tell them what the strategy is and show them the return projections,” Berk says.
Currently, Hilco Consumer Capital is not looking to fundraise. Berk likes the freedom of not having a fund, which “brings all kinds of responsibilities that make it less flexible and less entrepreneurial,” he says. “This gives us tremendous flexibility to operate in an entrepreneurial way. It gives us a competitive advantage to [help ] us close deals.”