Yellow Wood Partners has raised a $225 million pool of capital that will be used to make control or minority investments in the consumer packaged goods industry, the firm announced Wednesday. Yellow Wood, formed in 2009, said its funding came from endowments and foundations, but did not name any LPs. Yellow Wood has offices in Boston and Irvington, New York.
Yellow Wood Partners, LLC announced that it has raised $225 million of capital from a small group of blue chip investors, exceeding its $200 million target. The capital will be used to invest $10 million to $80 million of equity in control or minority investments in the consumer packaged goods industry with specific focus on companies or brands to which it can add value through functional operating expertise. This pool of capital will enable Yellow Wood Partners to acquire businesses with a combined enterprise value approaching $1 billion over the next three to five years. Yellow Wood’s investors include well-known endowments and foundations based in North America, the Middle East and Australia.
Yellow Wood Partners was founded in 2009 by Dana Schmaltz and Peter Mann, two seasoned executives with deep experience investing in and then operating consumer packaged goods businesses such as Blacksmith Brands, Prestige Brands, Meow Mix, Medtech, and the Spic And Span Company. The Yellow Wood team created Blacksmith in partnership with Charlesbank Capital Partners by buying five well-known consumer over-the-counter brands from Johnson & Johnson in October 2009, and then growing and selling the company to a strategic acquirer in November 2010 for a 2.5x ROI and a 149% IRR.
Yellow Wood Partners is differentiated by having a team of operating executives with functional operating expertise in sales, marketing, operations, finance and general management, as well as a small group of financial professionals. Yellow Wood believes that this combination of operating executives and investment professionals allows the firm to assess and invest in situations where operational improvements are the key to driving returns for its investors.
“Yellow Wood is taking a whole new approach to institutional investing,” said Dana L. Schmaltz, Partner, Yellow Wood Partners. “Our firm is not built around the standard private equity model consisting of investment professionals augmented by a group of operating partners, but instead is a team that has worked together at Blacksmith and in prior companies to operate and grow businesses.”
“Our approach allows Yellow Wood to better analyze the drivers of successful businesses and assist our portfolio management teams in exceeding their internal growth targets,” said Peter Mann, Partner, Yellow Wood Partners, and former Chairman and CEO, Blacksmith Brands. “We feel strongly that many businesses in our core middle market space can leverage the management skills we deployed at Blacksmith in creating, growing and eventually profitably selling the company.”
Yellow Wood Partners’ goal is to add value to the overall investment process in a variety of ways:
Using the team’s depth of experience to conduct more meaningful diligence when assessing investment opportunities
Shortening and simplifying the overall diligence process to provide sellers greater speed and certainty
Enhancing sales plans through sophisticated analyses of sales metrics and developing all-encompassing programs for retailers in the food, drug, mass and dollar store channels
Identifying and then analyzing opportunities to extend existing brands into adjacent categories and executing those expansion plans cost effectively
Reducing operating costs through manufacturing and logistics analyses
Fine tuning marketing programs and developing an efficient marketing spend
Improving financial systems to maximize efficiency with customers as well as internal G&A functions
Identifying appropriate, synergistic add-on acquisition opportunities; negotiating specific transaction parameters; and then helping to efficiently integrate the new business into the operating platform.
Yellow Wood has also endeavored to re-establish the alignment of interests among the Yellow Wood stakeholders: investors, operating management teams, and Yellow Wood principals. The goal is to bring this alignment back to where the risk/reward ratio for all stakeholders is more appropriately based on increasing the underlying equity values of the businesses in which Yellow Wood invests. As former managers of businesses, Yellow Wood will not burden portfolio companies with deal and management fees, but will achieve its returns in the same fashion as the owners and management teams of its portfolio companies.
Ropes & Gray LLP acted as the legal advisor to Yellow Wood Partners in its fundraising.
About Yellow Wood Partners
Yellow Wood Partners, LLC is an operationally focused firm that makes control and minority equity investments of $10 million to $80 million in consumer products companies. The firm was founded in 2009 by Dana Schmaltz and Peter Mann, two seasoned executives with deep experience investing in and then operating consumer packaged goods businesses. Yellow Wood, which has offices in Boston and Irvington, New York, is currently investing from a $225 million capital pool.