Catherine Ehrenberger demonstrates the Art-o-Mat vending machine
Catherine Ehrenberger demonstrates how the Art-o-Mat vending machine works, Thursday, March 18, 2021, at her gallery “Things I Like by Catherine” in East Naples.
Jon Austria, Naples Daily News
A hot streak in mergers and acquisitions globally has been felt locally.
The trend has resulted in some big deals for local entrepreneurs and investors in a little more than six months.
One of those big deals involved the acquisition of a company based in Gainesville that generated a record payout to a Naples-based investment fund.
Investors in Tamiami Angel Fund I earned more than 10 times the money they put into the company, known as Fracture, with their exit, according to the fund’s chairman. The business, started by two University of Florida graduates, prints frameless photos on glass.
Other eyebrow-raising deals include the sale of two longtime, successful manufacturers in Southwest Florida: Storm Smart in Fort Myers and Azimuth Technology in Naples. While the values of those deals haven’t been disclosed, market watchers estimate both transactions run into the multimillions.
Recent statistics put numbers to the global buying trend.
According to financial data company Refinitiv, the value of merger and acquisition activity broke records in the first quarter, hitting $1.3 trillion globally. That equated to a 94% increase over the same months last year.
The activity has proven resilient, despite the coronavirus pandemic, which initially slowed deals in 2020 to a record low.
In some cases, COVID-19 has spurred new opportunities and interest.
Investment pays off
Tamiami Angel Fund I initially invested in Fracture in May 2012.
A second investment followed in 2013 to further support the company’s rapid growth.
In total, the local fund pumped $910,000 into the online, direct-to-consumer retailer.
Summit Partners Growth Equity Fund X, a $4.9 billion fund, acquired the company on Feb. 1, through a special-purpose limited partnership called Curate Brandpartners, a home furnishings and decor business.
While the terms of Summit’s acquisition weren’t disclosed, it resulted in the “largest exit value to date for any portfolio company” in Tamiami Angel’s family of four funds, said Timothy Cartwright, a partner in Fifth Avenue Family Office and the funds’ chairman.
Investors earned more than $9.1 milion from the sale.
“That is a huge win for us,” Cartwright said.
The “Shark Tank”-style funds invest in promising young companies, but they don’t always pay off.
While angel investing is an important source of financial support for start-ups and emerging growth businesses, it comes with plenty of risk for its investors.
Investors in Tamiami Angel Fund I have exited four of the six companies they pumped money into many years ago. Two of the businesses failed — and another returned less than the fund infused into it, resulting in a disappointing loss, Cartwright said.
The first fund put a total of $2 million into all of the companies.
“We still have got two companies that are active — that we are hoping will exit in the next 12 to 18 months, which will bring even more profit to our investors,” Cartwright said. “They have already been paid back their investment amount, plus a significant return.”
Prospects for an exit from those businesses look really good, he said, due to a hot private equity market that’s driving a merger and acquisition frenzy.
A poster child
Fracture created the first mass-produced glass photo print in 2011 and posted $28.8 million in revenues last year.
The Tamiami Angel Fund’s investors not only provided money to Fracture, but guidance to help the company grow and position itself for a sale, said co-founder Abhi Lokesh.
Marketing the company for sale started early last year. Fortunately, the pandemic didn’t slow the process down — or hurt it in any way, since the company itself didn’t see much of an impact on its sales from COVID.
“Once we were able to observe and realize that we wouldn’t be impacted as severely as other industries, we were able to turn our attention to trying to make sure we got the best deal,” Lokesh said.
“Ultimately, the timing just worked for us,” he added.
Lokesh continues on as Fracture’s CEO. He and his team of nearly 40 employees retained a minority interest in the company. The other founder is no longer involved.
Fracture’s product isn’t like traditional photos in frames. Images are printed directly on glass and assembled into a frameless, ready-to-hang product with more true-to-life, vivid colors. Each order is made by hand at the company’s headquarters.
Before it sold, Fracture had shipped more than 100,000 orders worldwide.
“Lokesh and his team executed on the plan to grow the company globally by being receptive to feedback from experienced angel investors, a hallmark of great entrepreneurial companies,” said Roger Warren, a Tamiami Angel investor who represented the fund on Fracture’s board. “We were especially pleased to help a Florida-based company, spreading the message that our state’s angel and venture-capital ecosystem is gaining widespread recognition among investors and entrepreneurs.”
Grateful for the support, Lokesh said he felt good about ending up on the positive side of the fund’s ledger.
“I give the Tamiami Angel Fund a lot of credit,” he said. “It was a long journey.”
Another success story
In early April, Briant Rist sold a controlling interest in his company Storm Smart to Rotunda Capital Partners, a private equity firm based in Bethesda, Maryland.
After 25 years in business, Rist, 66, said he saw a great opportunity to sell his Fort Myers-based business, as he hit retirement age — and wanted to shift his focus to philanthropy through a charitable family foundation.
“I looked at the economy and right now the economy is very, very strong, but we know the economy goes through cycles and those cycles can take anywhere from three to five years,” he said.
That meant if he didn’t sell now, he might end up owning and running the company into his 70s.
“I thought that’s a little late to start enjoying life,” he said. “And I don’t have a son or daughter who had an interest in taking over the business.”
He also saw the potential for fresh ownership to come in with new energy and expertise to continue the company’s growth.
Storm Smart is already one of the state’s largest manufacturers and sellers of hurricane and other storm protection products for homes and businesses, which include high impact screens, windows, shutters and panels.
“We had gotten to be a bigger company, where we had almost 300 employees,” Rist said. “Sometimes, you’ve got to know what you don’t know. I had gotten to the point where I needed more expertise to take the next steps.”
The company will continue its growth pattern into new markets across Florida. Now, it reaches as far north as Tampa.
“This investment positions Storm Smart to capitalize on our potential and unleash our employees, who have been the real success stories of our company,” Rist said.
Efforts to sell the company started in earnest last year after several years of preparing for it.
The amount of interest — and the quality of the suitors — shocked Rist.
“In the beginning, we had over 150 companies interested in talking to us,” he said. “That was whittled down to 57, then 13, then eventually down to one.”
In the last year, Rist said he’s learned more about the right way to run a business than in all the years he spent in school, including college.
Through his family foundation, he said he’ll focus on teaching others about business and entrepreneurship, through partnerships with higher education institutions such as Florida Gulf Coast University and Florida SouthWestern.
As he embarks on his next chapter, Rist said he feels a bit of relief.
“The day after we closed on the business, when I woke up the next morning, I kind of felt like I had lost 150 pounds, because a lot of that weight was off my shoulders,” he said.
Under his leadership, the company landed on the Inc. 5000 list of Fastest Growing Private Companies five times. Other notable recognitions include the company’s designation as a Small Business of the Year by the U.S. Small Business Administration and its selection for the Florida Governor’s Ambassador Award.
In September, LongueVue Capital, a New Orleans-based private equity firm, announced the sale of Azimuth Technology, a firearms and defense manufacturer based in Naples.
LongueVue acquired the local company in 2017.
Azimuth’s new owner is Chumash Capital Investments, an investment arm of the Santa Ynez Band of Chumash Indians based in Santa Barbara, California.
The manufacturer primarily does business with the defense and firearms industries, making metal components. Products include bolt carriers, pistol barrels and pistol slides.
Under LongueVue Capital’s wing, Azimuth doubled in size and grew its market position, strengthening it reputation for innovation, reliability and quality products.
LongueVue worked closely with the company’s CEO Len Zaiser and his management team to grow and improve the business.
“Through their execution and relentless pursuit of excellence, these folks transformed Azimuth into a world-class precision manufacturer during our investment hold, gaining market share and building customer confidence along our journey,” said John McNamara, a co-founder and managing partner for LongueVue Capital, in a news release announcing the sale last year.
Likewise, Zaiser said the private equity firm was an ideal partner, helping it navigate the opportunities and challenges it faced in its attempts to grow the business.
“They were proactive, thoughtful, and highly responsive in their board-level leadership and stood behind their commitments to provide the capital and resources necessary for our company’s growth,” Zaiser said in a statement following the sale.
Zaiser was traveling and couldn’t be reached for further comment.
Like Storm Smart, Azimuth has landed on the Inc. 5000 list of fastest-growing companies multiple times.
According to its website, the company has delivered more than 12 million parts since its inception.
The fact that Azimuth has sold twice in a matter of a few years is yet another reflection of private equity’s deal streak that has reached Southwest Florida, Cartwright said.
“I think what you are finding is, with interest rates so low, people are looking to make money in a number of different areas,” he said. “One of those being private equity, another one of those being the stock market — and others being places like bitcoin and cryptocurrencies.”