Executing a buy-and-build strategy to unlock rapid international growth
In conversation with Wilhelm Koenning, Chief Executive Officer of ADA Cosmetics, and Marc Abadir, Managing Director at Ardian Expansion
Wilhelm Koenning: We had an extremely successful partnership with the team at Ardian over four years and the foundation of that was that they really understood our business and they were 100% committed to the growth plan we agreed at the beginning. One of the main reasons they knew our business so well was that 2014 was the third time they had considered investing in ADA. If a potential partner is that committed and has a lot of insight into your industry, it helps a lot.
Marc Abadir: It’s true that we looked at the business several times and over those years we came to appreciate ADA and its management team more and more. When it came to 2014 we were convinced this was a great opportunity and we were determined to do the deal. Although by then it was a tertiary buyout, we knew this was a deal with big potential because the previous private equity owners had left one of the main value creation levers for ADA–buy-and-build–untouched. The company was extremely well positioned in the German speaking region of Europe with strong organic growth and a management team that was keen to start consolidating their market. It was an excellent platform.
W.K.: We had reviewed several buy-and-build opportunities with our previous sponsor but for various reasons they didn’t pursue them. This time we needed a partner that was totally committed to the strategy–Ardian’s track record of international buy-and-build and their approach were the real differentiators for us. When we signed the deal, we had a list of at least ten potential targets and in cases like Scandinavian Amenities we had already spoken to them and were confident a deal was possible. It was the same with the company we acquired in Malaysia: we knew them well and we were able to get straight into bilateral talks. Pacific Direct was different since that was an auction driven by their private equity owner. It was by far our biggest acquisition, but we knew exactly what we were buying because they were in the same business.
M.A.: Because we had the same vision as ADA’s management from the start, we could begin executing the strategy immediately. We invested in ADA in August 2014 and did our first acquisition in April 2015, buying Scandinavian Amenities and shortly thereafter we acquired Pacific Direct in September 2015. That meant that we almost doubled the size of the group in a year.
W.K.: Ardian executed the plan with us in a very timely way and I’m really thankful for that because it is not the norm. But that’s what good management does: analyzing, planning and executing what you’ve said you would do. We were very pleased to be moving ahead at last, but we suddenly found we’d taken a major leap in size, especially after Pacific Direct. Our back office didn’t fit the new organization any more, we had three production facilities instead of one, our supply chain was getting stretched and we had to integrate three companies with more than 400 new employees. It was a steep learning curve but we looked at everything from the perspective of best practice. That helped a lot because once people see that’s how you’re doing it, they buy into the process much more easily.
M.A.: The most important thing was to fit the different cultures together. I think their desire to adopt best practice, no matter which part of the organization it came from, was key. But it was also crucial to bring in an outside expert to help with the integration process.
W.K.: Yes, since we were new to acquisitions, Ardian supported us, for example in hiring a post-merger integration manager who stayed for about a year and did a superb job in helping us to tie up all the loose ends. In the end we realized a substantial amount of the synergies we had identified prior to the acquisitions. We made tremendous progress over those four years but we knew our partnership was for a limited period –unfortunately the more successful you are the shorter it is. It was a mutual understanding that our next stage, particularly in North America, would be done with a new financial partner.
M.A.: Whenever you exit a great company you do it with both smiles and tears. We had our challenges, but due to a strong partnership with the management team of ADA, we overcame them. We’ll watch how ADA evolves with great interest and hope their next partnership is as fruitful as this one. It was an excellent investment for Ardian.