AgroFresh Solutions Inc. was spunoff into a stand-alone public company, listed on NASDAQ, after Dow Chemical acquired Rohm and Haas, of which it had originally been a part. Clinton A. Lewis, Jr. entered after this series of events, after having been part of a leadership team that led and facilitated what he calls one of the most successful carve-out IPOs in the life sciences industry: the animal health division of Pfizer, which became Zoetis.

A major difference between the two situations is that AgroFresh was spun out via SPAC, which immediately created challenges for the newly public business.

"This company was started out as SPAC and really struggled coming out of the gate," Lewis, the company's CEO and board member, said during the Philadelphia Smart Business Dealmakers Conference. "It couldn't file its books and records on time there were several restatements. And under Denise (Devine, Board Of Directors, Chair Compensation Committee, Member Executive Committee and Audit Committee for AgroFresh) and other leadership with the board, really cleaned up that company, and it was from a standpoint of being able to meet its obligations as a public company, did a fantastic job. But as a company positioned to grow, it struggled."

Despite what he called the company's pharmaceutical-like margins, the capital structure was upside down. The SPAC process had loaded it with an inordinate amount of debt, and the clock was ticking.

With debt maturity was looming, a private equity firm, Paine Schwartz Partners entered the picture and injected liquidity. That helped forestall some of the challenges with the senior debt, creating cash flow and flexibility from a financial structure for the company to pursue growth, but primarily from an inorganic standpoint. And the company still had significant portions its stock in the hands of a few major investors.

"So, you think about the capital structure of the business, there's little to no liquidity," Lewis says. "There's no headroom. There's no float. We have a compelling story. I've had years of engaging with sell-side analysts; there's never been a time, there's never been a conference where somebody says, Hey, this is not an investable story, especially now with the strong push around ESG. It is a very compelling story. But at the same time, large institutional investors that want to move large blocks of money, they just said they couldn't invest in the company, because again, there was really no liquidity, no headroom there."

So, the board began to consider the options. One was to deal with the big issues at hand. The first was that Dow owned 40 percent of equity, and wasn't likely to just dump or sell without getting an appropriate return.

The second was to deal with the company's significant amount of debt. And while the private equity investment helped buy some time, there was still the looming debt maturity. So, as they engaged Dow and some of the company's other investors, they also worked with financial advisors to see about restructuring.

The private equity company, with its board seats giving them an inside view of the challenges, also helped assess options. That's when the idea of going private came to the forefront.

"One of the overriding benefits of going private, in our case, every company, public or private, regardless of the sector, should be able to full-throatedly explore and exploit growth opportunities both organic and inorganic," he says. "The challenge for the company, when you think about the liquidity and the thinly traded stock, is that the only opportunities for us to really pursue growth was organic. And so inorganic was largely off the table."

Fortunately, beyond being just a financial sponsor, Paine Schwartz also had deep sector expertise. They understood the market, the challenges and the strategy that AgroFresh was trying to employ, which was both organic and ideally inorganic.

"The public to private, from a standpoint of our strategy, is going to be a non-event," Lewis says. "What actually is positive, if we're able to go private and if it ultimately comes to pass that it happens with Paine Schwartz, was the fact that they obviously know the business, but they will be coming in with fresh equity, financial resource for us to make sure that we are now fully balanced in our ability to pursue growth, both organically and inorganic."

Ultimately, in April 2023, AgroFresh closed its go-private transaction with investment funds affiliated with its private equity partner Paine Schwartz.

Once it became a private company, Lewis says he was no longer just using half of the whiteboard when exploring strategies.

"We're talking about what are the things we continue to do to play our strategy from an organic standpoint? What do we do to continue to pursue that from an inorganic?" he says. "So, the inorganic piece is a big one. Even though the niche is relatively small, we're still the market leader in that niche. And so oftentimes, it's that market leader that's thinking about, where can you bring some responsible consolidation. So, it goes back to the inorganic side. And for the team, very easy to keep them focused on the strategy at hand. When it became clear the opportunity not only to go private, but go private with Paine Schwarz, it was also the recognition that now, no guarantee, but we will have the opportunity to put on the table bonafide opportunities to drive inorganic growth."

And those opportunities manifested quickly. AgroFresh, in September of the same year, acquired Tessara, a South African-based provider of intelligent packaging solutions.

Lewis says for those considering whether the right path for their company is public or private, gather as much information as possible and weigh the pros and cons.

"I have my inherent bias based on size and capability of the company. Smaller stocks, especially in today's environment, have trouble standing out. You will be spending a lot of time trying to pitch your stock to people that lack appreciation around the sector or the space," he says. "It's just another way of going out and trying to secure money. And so really think about whether private or public is the right option and the right path for you."