Happy Monday, Hubsters. MK Flynn here.
In New York, it was a beautiful weekend. I imagine that many of you took advantage of the nice weather to spend some time gardening, mowing the lawn and doing other home maintenance activities.
One private equity firm betting that’s the case is Ronin Equity Partners. The New York private equity firm announced this morning that it is launching a new platform investment through the acquisitions of three makers of outdoor power equipment and utility trailers for homeowners, small landscapers, ranchers and farmers.
Two of the businesses, DK2 and SnowBear, are based in Ontario, and the third business, Currahee Trailers, is headquartered in Mount Airy, Georgia. DK2 pioneered the combination of online ordering (via close partnerships with home improvement chains like Home Depot and Lowe’s) with door-step delivery of previously difficult-to-package outdoor power equipment and utility trailers, according to Ronin.
The combined company will operate under the DK2 corporate name, and Ronin Partner Tiffany Bell is joining DK2 as chief financial officer. The owners and senior management teams of all three companies have retained a significant stake in the merged group and will remain actively involved in company management.
I asked David Feierstein, managing partner of Ronin, to tell me more about the forces fueling demand for the new DK2’s products.
“During the covid pandemic, we saw significant de-urbanization and increased time away from primary urban homes,” Feierstein explained. “With an increase in flexible working environments, North American consumers are spending more time in suburban and rural locations. DK2 was especially unique in being able to access that trend – the company has been a pioneer in drop-shipping items, such as power equipment and utility trailers that were previously not shippable.”
When asked what the impact of today’s nerve-wracking economy will be on demand for DK2’s products, Feierstein responded:
“While rising inflation and mortgage rates will affect new home purchases, the key driver of DK2’s products are home maintenance and improvement. When new home purchases slow down, many homeowners spend more time adding or improving their existing homes to create home equity value without upgrading the entire home.”
Add-ons are expected. Although Ronin declined to disclose the purchase price, the firm said that, on a merged basis, the group registers annual revenues of more than $60 million and shows average annual sales growth over the past five years of 40-plus percent. Ronin has reserved more than $25 million to fund acquisitions for DK2 and is currently in discussions with several targets. More than 35 complementary businesses have been identified.
FOMO. As PE Hub expands our coverage of private equity deals in Europe, it’s worth taking a look at the continent’s venture capital market. Europe’s VCs and start-ups may get through the downturn with less pain than their US counterparts, Venture Capital Journal’s David Bogoslaw wrote in a feature published today.
“Investors from outside Europe are realizing they need to be actively investing in the region if they want to stay abreast of the talent,” David reported. “That has spurred major VC firms such as Battery Ventures, Sequoia and General Catalyst to open offices in Europe in recent years.”
“Just as specific cities in the US have become identified with certain kinds of start-ups, regional specialization has emerged within Europe,” Jessica Archibald, managing director of Top Tier Capital Partners, a San Francisco-based fund of funds with an office in London that focuses on European VC investments, told David. Scandinavia is known for its gaming and communications companies, including Angry Birds, Candy Crush Saga, Skype and Spotify, while London has gained a reputation as a fintech hub.
US investors are increasingly disinclined to ignore any of these varied regions in Europe, just as several years ago nobody wanted to ignore emerging startups in China or India, Archibald continued. “I don’t know whether it’s a fear of missing out, or a portfolio diversification, but I think that’s driving some investors to Europe.”
And for an update on private equity-backed deals in Europe, check out Thursday’s Wire, which will be written by Craig McGlashan, who leads PE Hub’s coverage in Europe.
Dinner and a movie. Also on Thursday, I hope to see some of you in New York at the 5th Annual Exchange, hosted by Exponent, a collective of senior women dealmakers.
I’ll be moderating a Fireside Chat with Kristin Johnson, managing director, Alamont Capital Partners; and Shelli Taylor, CEO, Alamo Drafthouse Cinema, a dine-in movie theater chain and streaming service backed by Altamont. I’m looking forward to learning about how Altamont has helped guide Alamo through the challenges of the past two years.
I’ll see you back here tomorrow with the Wire.
All the best until then,