Three Little Pigs was an acquisition Village Gourmet CEO David Kemp and Gemini Investors President James Goodman did together. Over the past six years since, they have grew it from a single company into Village Gourmet, which holds five different brands and has five different facilities and a great deal of growth.
Goodman says at the time of the Three Little Pigs investment, the understanding was that they were making a bet more on the jockey — Kemp, the CEO — than the horse.
"So, we got very comfortable with Dave Kemp over an extended period of time that he would be a good steward for a business that we invested in. I won't go so far as to say that David could have made any small business successful, but I will say that many of his peers wouldn't have been nearly as successful running a business like Three Little Pigs as he was."
Three Little Pigs eventually became the centerpiece onto which other companies were added. Goodman says he often can't afford to pay for the very best companies in an industry. So, they look for a solid business that isn't facing immediate challenges that they feel they can acquire at a reasonable valuation.
"So, the deal dynamic needs to be OK, the business needs to be a decent business and then that's where our jockey steps in and takes that decent business to new heights, and that's what happened here."
As Three Little Pigs grew into Village Gourmet, it became quite a different company than it was six years ago. Switching the company into growth mode requires a different mindset, Kemp says, as well as different resources. It's meant adding more positions, and more processes and policies.
"As we've grown, the complexity has increased," Kemp says. "So, we constantly have to refine our processes as we grow and making sure what worked when we're smaller and may have been great then may no longer work as there's more layers, so we're constantly evolving."
Being bigger has its upsides. He says the company is now able to do more things like cross-selling and providing centralized resources that can help each brand grow.
"We're actually getting a lot of benefits from being bigger that before we didn't necessarily have," he says.
Part of the company's growth path included a majority investment from the private equity firm Quad-C. Goodman says that transaction was initiated by Kemp because once he had consolidated the acquisitions that were made in 2020 and early 2021, he saw the opportunity to accelerate the company's growth and take it to the next level.
"We recognized that we didn't necessarily have the checkbook or the wherewithal to fully accommodate Dave's ambitious growth trajectory," he says. "What we decided to do then was to find a new lead partner that we would transfer control to, but we were eager to stay along for the ride to the fullest extent that we could. We actually reinvested a larger amount in Village Gourmet as part of the recent sale than is typical on a new platform for us, so we made a large, continuing bet on Dave and his team."
What he says they really valued from Quad-C was their openness to have a minority equity partner continue.
"Surprisingly for us, many of the larger private equity firms don't welcome that. But Quad-C did. Plus the fact that they have a terrific 30-year track record and they have fully lived up to our high expectations of them post-closing. So, we got the best of all worlds: we found a great lead partner, we were able to have a partial realization and we were able to continue our bet on Dave and Village Gourmet all in one transaction."
There were several bidders in the same general valuation ballpark when Village Gourmet went to market. So, for Goodman, it was really a question of who they wanted to maintain an investment with.
"Then it's a question of how accommodating are they to having another investor? But even more important than that, how experienced are they in the industry in a buy-and-build acquisition strategy. And probably most important of all who was Dave comfortable with because we'd had a great partnership for, I believe almost six years at that point, we wanted that to continue. I've often said that these five-year plus relationships are the business equivalent of a marriage and if Dave had unease or questions about who the prospective buyer was — as I think I recall he might have had with a few of the folks that were in management presentations — but he clearly took to Quad-C. He thought there was great chemistry there. They had a long successful track record. They were willing to accommodate us as a minority investor going forward — all of the stars aligned very nicely on the transaction."
Kemp and Goodman spoke at the Boston Smart Business Dealmakers about buying Three Little Pigs, growing it into Village Gourmet and taking that company to market. Hit play to catch the full interview.