Dive Brief:
- Chicago-based private equity firm City Capital Ventures, LLC acquired Cookie Specialties, Inc. The company also has a new name: Matt's Cookie Co., as a reflection of the Matt's brand of cookies it sells.
- Matt's Cookie Co. makes several varieties of all-natural cookies and fig bars mainly distributed in the Midwest. The family-oriented business will continue to feature the founding family in day-to-day operations, which fits into City Capital's mission to combine family capital with a family business, according to Food Business News.
- City Capital has also acquired a majority stake in Diedrich Roasters, a Ponderay, ID-based maker of batch coffee roasting equipment.
Dive Insight:
Family-owned businesses have a unique structure compared to most other businesses, and that structure may be beneficial to major manufacturers teasing out potential acquisition targets. Family businesses tend to focus on resilience rather than performance or taking risks on high returns, according to a 2012 study published in Harvard Business Review.
The study found that family businesses didn't earn as much money as companies with more dispersed ownership structures during better economic times. However, when the economy took a turn, family-owned businesses performed far better than competitors. Also, family-owned businesses demonstrated a better long-term financial performance on average in all of the countries examined, including the U.S.
Family-owned businesses are also attractive acquisition targets because they tend to have less debt, more conservatively-run operations, and low employee turnover, according to The Wall Street Journal. In recent years, it has been a seller's market, but interest rates are expected to rise, and the presidential election could mean higher capital-gains taxes. This means manufacturers may be able to negotiate lower multiples for these businesses in the near future.
While the U.S. economy may be on an upswing, many major manufacturers have been struggling with financial performance, particularly in certain segments like soda and cereal. The resilience and conservativeness in operations that a family-owned business could bring may be a solution for waning food and beverage segments.