Growing up on Chicago’s North Side, Stuart Sorkin often rode his bike to the Affy Tapple outlet store on North Clark Street to buy sweet treats. Years later, those fond childhood memories played a part in his decision to buy the struggling business.
“It was a small company, and it had the basic product and the brand name, but it had lost a lot of its major customer relationships,” Sorkin says. “When I took it over, we probably had 20 percent of the Midwest market share. Within three to four years, we had close to 80 percent, and we dominated the Chicago market, Milwaukee and related areas. Then we started expanding.”
Six years after buying Affy Tapple, Sorkin acquired Mrs Prindables, a gourmet apple and confectionary company.
“When you put the two brands together, by the time we sold it in 2017, we were nationwide and far and away the largest caramel apple, gourmet apple and handmade confection manufacturer,” he says.
In this Dealmakers feature, we return to our conversation with Sorkin to learn more about his dealmaking strategy — both as a buyer and a seller.
Establish a foundation
Sorkin got his start in business at the former Big Five accounting firm Arthur Andersen, then spent time at American National Bank of Chicago, now part of JPMorgan Chase. These experiences gave him a good foundation on which to build his approach to dealmaking.
“I began to understand a lot of things about how businesses work, how to read financial statements and the inner workings of dealmaking through those experiences,” Sorkin says. “I just knew at one point, when I found the right thing that got me excited, that I would probably jump in on the business side, as opposed to being on the service provider side.”
In 1995, Affy Tapple presented that opportunity. Sorkin knew it wouldn’t be easy.
“But the business was strong enough to where it was able to sustain itself, even with the neglect that it was suffering from,” he says. “So the light bulb went on and I said, ‘Wait a minute. This is a brand that is so much bigger than it should be. Why don’t I take a look at it?’”
In the early days, it was largely Sorkin and his wife, who had an accounting background and experience working on big deals at Sara Lee Corp., who made things happen.
“She handled all the internal things after the acquisition, like accounting and HR and a lot of the administrative things,” Sorkin says. “I handled manufacturing and sales. The goal was to bring the brand back to where it once was and fight all the challenges that were necessary to do that.”
Assess the risk
Before you buy a company that has problems, you need to have a plan. You also have to make risk assessment a top priority.
“What is the company’s position in the marketplace, and why is it successful or unsuccessful?” Sorkin says. “What is it about the business that is driving performance? Is it the product? Is it the people? Is it the brand? Is it luck? You have to assess the strength of the company. We had to build a company from the ground up, everything from putting in organizational structure to a management team and operating systems.”
The key to any acquisition strategy is to know what you’re facing before you close the deal.
“What are the risks that are attributable to the product or service that the company provides?” Sorkin says. “In the food business, there’s inherent risk like food safety, but there’s always risk in any kind of industry. You need to assess those risks as best you can.”
Be prepared for the exit
Fast forward to 2017, and Sorkin found himself on the other end of the dealmaking spectrum. He had accomplished his goals with Affy Tapple, and he was ready to sell.
“In our case, it was maximizing sale price, but also making sure that key people in the company could potentially benefit from the sale,” he says. “There were a lot of people who helped build the company, so it was important that the new ownership would take care of these key people.”
Another condition important to Sorkin was his own role in the company after a deal got done.
“I did not want to stay on and do another round with somebody else’s money,” Sorkin says. “I was ready to move on and let the next group continue to grow the business.”