Case Study - Acquisition from an Inactive Owner with a Creative Structure


ENERSYST DEVELOPMENT CENTER, LLC

Farmers Branch, Texas

Enersyst developed and licensed technology used in equipment for the foodservice, food processing and residential markets. 

Seller Need: The seller, the widow of the founder, wanted to achieve liquidity while retaining some participation in the future revenue of the business. Of critical importance to the seller were the continued legacy of the technology and the fair treatment of all of the company’s tenured and loyal employees.

Transaction: In February of 1995 Argenta Partners acquired Enersyst. The founder had developed, patented and licensed to others technology for high-speed cooking. The benefits included a substantially reduced time required for cooking a variety of food products. In the case of pizza, the technology revolutionized the industry from the use of traditional “deck ovens” to high speed “impingement ovens” and resulted in pizza transitioning to a made-to-order food product, both for delivery and in restaurants. We developed a structure for the investment resulting in a combination of cash consideration at closing plus participation in future royalties in excess of certain minimums.

Role: We brought a new Chief Executive Officer and a new Controller to the business and participated in changing the strategy to a more aggressive technology development and marketing program. The significantly enhanced marketing efforts resulted in several substantial new licenses in the commercial and residential markets. We provided equity ownership for the leading members of management and provided significant compensation incentives for other key personnel. The company developed, patented and licensed additional technologies including an oven for residential use.

Outcome: The business was sold to a strategic buyer in December of 1999 resulting in substantial gains for the investors, the management team and for the Seller.

As viewed by the Former CEO:

“My transition from a multi-national corporate executive to a private equity Chief Executive Officer was made possible and richly profitable due to partnering with Argenta Partners.

With Argenta, there was deep respect for the knowledge that came from within the business and their ability to contribute collaboratively when invited, or when their experience and counsel impacted the valuation of the business. I didn’t feel a redundancy, but rather recognized them as partners. They have a deep bench of senior partners whose experience can be tapped where the G&A or consulting resource would be prohibitive but where a brain trust is critical.

Argenta Partners is perfectly suited for small to mid-cap companies. They insist on executive team ownership and work creatively to make that possible. In their world, operating entities and investors need aligned incentives: in the end that means building business valuation, managing cash flow, and protecting the balance sheet. They truly mean pay for performance. Their involvement leads to healthy companies.

Partnerships require trust – Trust built from prompt yet considered decisions, risk sharing, capital headroom, and frankly, judgment that comes from seasoned experience. I would invest, and have, with the Argenta Partners team again and would also lead one of their businesses again.”

Sarah Palisi Chapin
Former CEO Enersyst Development Center, LLC