Fortissimo ‘Got Busy With The Fizzy’


Target: SodaStream International

Investor: Fortissimo

Return: Over $220 million returned to investors on an $8 million investment

Return Multiple: 25x

Israel’s Fortissimo shows us how it is done with the turnaround of an ailing drinks-maker business expanding from its native Israel to over forty countries in three years and generating an impressive 25 x return for investors.

If you can’t remember craving a hit of the button of a sodastream drinksmaker as a child of the eighties (living in the UK), then you haven’t lived. In the UK (where it was first sold) the SodaStream machine is strongly associated for many with childhood nostalgia. The drinks system, which allows the addition of concentrates to create carbonated flavored beverages, was invented by Guy Gilbey in 1903. The system was hugely popular in the 1970s and 1980s when it was accompanied in the market with various brand name syrups. Its memorable tagline, since retired: “Get busy with the fizzy.”

However, as the years passed with more emphasis and marketing on healthier, less sugary drinks for children and adults, the Israel-based business began to suffer.

Israel-based private equity group Fortissimo, which has over $200 million under management, led an investment in SodaStream in 2006 when it was about to default on its bank debt and would have gone bankrupt. The firm took a majority stake and control of the board. The team met the company upon recommendation of one of their lawyers (Chaim Friedland of Gornitzky) in October 2006. At the time, the company was in financial distress and had received warnings from the anti-trust authority in German regarding its activities in the region. Fortissimo was able to sign a term sheet and provide a guarantee by December 2006 and save the company from defaulting on its bank loans.

Partner Marc Lesnick, who worked on the deal, said they viewed the anti-trust issue as an opportunity and, rather than fight the authorities, welcomed the warning viewing it as healthy competition for the new category.

At the time of Fortissimo’s investment, the company was selling just one product—the original, white plastic home carbonation system. Its products were being sold in 12 countries with virtually no sales in the United States. Usually a company starts in a developed market and then moves to an emerging market. Here Fortissimo did the opposite—successfully.

The Fortissimo team immediately brought in new management—Daniel Birnbaum, previous CEO of Nike Israel, Pillsbury Israel and P&G executive. It also created innovative products (glass bottle machine; newly designed machine) and expanded geographically to 40 countries in three years. The team also had to significantly enhance manufacturing capabilities in order to meet increased demand.

Sales for the business increased significantly and the company went public on Nasdaq in November 2010 at a value of $850 million. The stock price went from $20 to in excess of $70 in the first six months of trading. Fortissimo was able to exit by selling its shares in 2011 (after the six month lock-up). This generated in excess of $220 million to investors on an $8 million investment (25x return). Lesnick says of the deal: “From many institutional investors I am told it is by far the best return globally of this vintage.”

A major disctinction of this deal, adds Lesnick, is that this was not just a financial play. “In addition to replacing management, our key to success was to infuse innovation into the company—taking a sleeping, one product company with one white plastic machine to machines with a variety of colors, glass bottles, stainless steel and fizz chip.” He added: “We took a model that worked in one region global. From 12 countries to more than 40. From $100 million in revenue to $300 million in revenue and very profitable.”

When Fortissimo bought the company EBITDA was negative. In 2011, EBITDA had reached $30 million. Sales in the United States alone in 2011 (which were virtually non-existent when Fortissimo entered) totaled more than $80 million. Products are now sold in retailers such as Bed Bath & Beyond, Target, Best Buy, Macy’s and Williams Sonoma. There were less than 600 employees when Fortissimo entered; now there are more than 1,400.

By providing capital, restructuring the debt, expanding geographically, creating new, innovative products, Fortissimo was able to turn the company round and generate a tidy exit and profit for itself and its investors.

Why the Firm Won

  • Turned around a company in financial distress, selling just one product with virtually no sales in the United States by bringing in new management, creating new products and expanding geographically to 40 countries in 3 years
  • Raised revenue from $100 million to $288 million
  • Negative EBITDA rose to $30 million
  • Went public in November 2010 and share price soared from $20 to over $70 in the first six months of trading
  • Sold shares following six month lockup distributing over $220 million to investors inspite of turbulent market conditions
  • Number of employees has more than doubled from less than 600 to 1,400
  • Products now sold in 42 countries compared to 12 when Fortissimo acquired the business