Mid Market Staircase Photograph

Pass the cranberries, please

Cranberries_SmallClement Pappas and Lassonde Industries will share a special Thanksgiving this year. The Pappas family is big in cranberry products and publicly-traded Lassonde saw an opportunity to bulk-up. The result was a cash purchase at 8.3x cash flow with a recipe for succession and continuing meaningful ownership stake.

After pocketing $400 million and keeping nearly 20% of what is now a subsidiary of a strategic partner parent company, the third generation secured the roles of CEO and EVP to continue to lead the 630 employees who owed their livelihoods to the second generation brothers who built the business into a private label powerhouse.

Brothers Dean and Peter Pappas took over the business in the mid-1960s when their father Clement passed. He had arrived at Ellis Island in 1914 and founded the business in 1942 after working with his own brothers for several years.

I had the pleasure of meeting Dean and Peter to work on occasional estate planning and acquisition projects as they systematically transformed the business into a national player. Peter fell ill and passed in 2010. The company continued to expand and invest with a long view.

With a strong competitive position and industry dynamics confirming the merit of its strategic direction, it was entirely logical for a suitor eager to satisfy public shareholders’ thirst for growth to come calling for the critical mass to support national customers throughout North America and benefit from combined logistics, distribution, purchasing and other economies of scale. In early summer 2011 the terms were set for a structure that provides for all the major elements of the issues facing multi-family businesses.

The company clearly valued at a handsome premium in reward for growth and an operating margin of 15%. The max of cash proceeds of $400 million and a continuing equity position allowed the family shareholders maximum flexibility for current needs and future generations to benefit from the business combination while the third generation stays at the helm. That is quite a meal.

cocktail-napkin3MidMarket appreciates that the complexities family business owners face today make it increasingly important for them to be able to rely upon highly experienced advisors dedicated solely to the best interests of the family. We invite you to contact us to find out how we can be of value to you.