Compass Group Equity Partners has been a busy player in the St. Louis M&A market. They've developed eight platforms over the last seven years and have acted as a lead partner in seven deals in the last two years alone, including an $825 million Sunpro Solar deal with ADT Security Services.
The initial acquisition of Sunpro presented its own set of hiccups with COVID, but finding the right partners made a world of difference. In less than a year, Compass Group was able to earn significant returns on its investment.
“There were challenging times, but persistence finally found partners that believed in us and the opportunity,” says John Huhn, founder and managing partner of Compass Group Equity Partners.
The process started back in 2015 when Compass Group began research into renewable energy companies. They considered companies with other alternative energy options and there were large-scale construction projects to consider, but it was the in-home solar energy sales that piqued their interest.
“We explored wind and solar and hydro and all those options,” Huhn says. “And, of course, landed on solar. We dug into that industry further, including residential, commercial, industrial and utility-scale projects, and landed on residential. We were really intrigued by solar itself."
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Once they determined residential solar would be their target, the next step was finding the right company.
“We found a business through our proprietary search called Sunpro,” Huhn says. “Sunpro was an absolute rock star management team that had a great strategy for growth. We worked with them to support that and understand how we can grow that business, and you can imagine if it's growing very quickly — doubling, tripling in a in a year — how do we keep it on the rails?”
Compass Group owned Sunpro for less than a year but was instrumental in getting the deal done with ADT Services. When Compass Group first acquired Sunpro, it was operating in nine states. Today, it has expanded to more than 25 states.
Huhn said the key to the deal done was the ADT Services team.
“When we connected with Marc Jones and his management team, we knew they were doing something very well,” Huhn says. “And we really like their mindset — tremendous team that were committed to growth and they were committed to quality."
Compass’ acquisition and subsequent sale of Sunpro almost never happened when COVID reared its ugly head. Compass was on the cusp of closing the deal in March 2020, when the world paused.
“If you're selling solar systems to people in their home, in a face-to-face in-home sale, you would think COVID-19 would disrupt that business” Huhn says. “As any good investor would do, we paused to see what would happen.”
Compass Group was certain the pandemic would hurt Sunpro’s business, and they were correct.
“It did for a short period of time — a couple weeks or a month. But very quickly we all learned how to use Zoom,” Huhn says. “And customers got very comfortable with someone coming to them and — being based in New Orleans and the south in April — you could go have a conversation on the porch, or on the back deck, or stand outside and look at the roof and talk about a solar system. Or those who are comfortable with it invites you in their home and have a conversation and the business continued forward just fine.”
COVID, in some ways, helped the business. For example, if you’ve ever purchased anything of great value for your home from a salesperson, the first thing they want to know is when both partners will be home.
“With COVID, both are home,” Huhn says. “So, all the sudden it's much easier to have this conversation. And so the business not only continued, it continued to flourish and grow which, in turn, might have cost us a little bit as the valuation perhaps went up a little bit.”
Another COVID-related matter caused an investor to pull out of the deal to acquire Sunpro. It was a major university that was concerned about a lack of sports income as athletic events were suspended.
“Well, you can imagine that investor is kicking themselves now with when we were able to provide a many-times multiple return on investment in just one year,” Huhn says.
Moving forward, Compass Group is building a fund, which will enable Huhn and his team to continue doing what they love.
“Our first love is doing deals and running businesses and wanting to build those businesses,” Huhn says. “So, raising a fund allows us to get back to doing just that.”