Brian Hopkins cut his dealmaking teeth on doughnuts. Krispy Kreme Doughnuts to be more specific.
His experience on a three-person team that crafted a strategy to take the renowned maker of sweet treats public in 2000 proved to be invaluable.
“It was rewarding because you got to see this company raise a lot of capital and go out and use that capital to grow and provide its product across the country rather than just in a region,” Hopkins says. “You could see the benefit on a day-to-day basis. We got to see how they positioned the story, how the economics of the deal would allow the company to grow and how the CEO and CFO did a great job working together to create a strong story and message.”
Krispy Kreme grew substantially as a publicly owned company before it was acquired in 2016 by JAB Beech Inc. for $1.35 billion and returned to private ownership. Hopkins went on to work at Primus and then Ancora, where he currently serves as managing director of corporate development, making recommendations and sourcing deal opportunities for the growth equity firm. His experience at Krispy Kreme taught Hopkins about the role dialogue plays in getting deals done.
“Dealmaking is all about relationships and working toward something that can have a major impact on the future of the company,” he says.
We spoke to Hopkins about the role relationship-building plays in his dealmaking activity and the value of maintaining discipline.
How do you lay the groundwork for potential deals?
Ancora acquired Inverness Holdings about three years ago — a great acquisition for both us and for Inverness. It resulted from a relationship cultivated over a number of years between our leadership and theirs.
The deal really deepened our expertise and scale in the private wealth business and provided Inverness with a much broader breadth of offerings for its clients. As a result, both firms increased their value. In those strategic transactions, the key is that ability to add value on both sides.
When you have a relationship with an individual management member at a company, a shareholder, an investment banker or another PE firm, for us, it’s the best way to see deals. Often when you see so many deals, it’s tough to shake through them all to get to the ones you like.
When you have a strong network of relationships, it acts as kind of its own funnel.
Regular communication is key. If you stay in contact through the whole process with the key people you’re going to be working with post-transaction and you have a consistent message, you’re far more likely to close the deal than if you’re just working through intermediaries. If you do that and you get to the last second and somebody has a problem, it can create hard feelings and a difficult environment. You need to talk to people on a day-to-day, week-to-week basis throughout the whole process. Be disciplined and make it a priority to stay in front of those people who are the key decision makers on the other side.
What’s your take on acquiring companies that are struggling?
Do not invest in deep turnaround situations unless you have a very specific point of view and skillset on how to get the company turned around. You need to have the right people and be confident in their ability to help you do a deep operational turnaround. Those can be disasters if you don’t have the right people and the right strategy. If you buy a good company, pay a fair price and have some issues with management or some other hiccups, that’s lot easier to get through than a company that is distressed.
How often does ego get in the way when pursuing a transaction?
There’s a lot of risk as a dealmaker that you can try to win a transaction by being the highest bidder. But if you’re paying a price that results in poor returns, you’re not winning anything. We’re very disciplined. Just because somebody comes in at a higher price than us doesn’t mean we’re going to go outbid them. It’s all based on what we think of the company, what the return to our investors is and long-term, what we think of the business. We’re very disciplined in terms of sticking to a pricing model that works for us.
That’s something a lot of people struggle with. There is a famous movie people often study at business school, “Barbarians at the Gate,” about the buyout of RJR Nabisco in the ’80s. Two private equity firms got into a war to buy the company and [Kohlberg Kravis Roberts & Co.] ended up “winning” the deal. It was the largest LBO ever and got great press at the time, but it ended up being a poor deal because they bid the company up so much. It was a very competitive situation driven by ego and it happens all the time.
