GSP 4.0, launched six months ago, wrapped up in January at its $850 million hard cap, ahead of a $750 million target, managing partners Matt Perelman and Alex Sloane told Buyouts. The vehicle is larger than the 2021-vintage GSP 3.0, which secured $600 million.
Garnett Station’s rapid pace was supported by both new and existing LPs, including endowments and foundations, family offices, financial institutions and pensions. Its experience differs sharply from that of many GPs who are today compelled to keep their offerings open longer due to cash-poor or overallocated LPs.
Founded in 2013 to invest in lower-mid-market consumer and franchise businesses, Garnett Station has a unique backstory.
Perelman and Sloane, who grew up together in New York, apprenticed in private equity at L Catterton and Apollo, respectively, over 2011-2013. The pair next entered Harvard Business School, where under the banner of Cambridge Franchise Partners they acquired 23 struggling Burger Kings in Henderson, North Carolina.
Operated by Carolina Quality, the restaurants were turned around by Perelman and Sloane and, with the help of a roll-up acquisition strategy, emerged as a fast-growing franchise company. The deal provided the basis for Garnett Station, named after the venue of the 23 Burger Kings.
The firm has since made 15 platform investments using the same playbook. Target opportunities are US multi-unit franchised, consumer and brick-and-mortar companies in sectors like food and beverage, health and wellness, automotive and business services “anchored on foot traffic,” Perelman said.
Garnett Station is typically the “first institutional capital” in its deals, Sloane said. Able to invest up-and-down the capital structure and across an array of deal types, it most often acquires majority-control stakes in companies alongside founders. Equity check sizes range from $40 million to $75 million.
Establishments usually have 20 percent unit profitability on entry and roughly 50 units that Garnett Station looks to increase to 100 to 200. It does this by “professionalizing businesses and scaling them,” Perelman said, investing in management, operations and technology as well as M&A.
Garnett Station’s strategy proved its mettle during the covid-19 pandemic, which significantly upended the retail industry. Portfolio companies were “kept afloat,” Perelman said, and in some cases used to “go on the offensive.” The firm also deployed private credit to address dislocation.
The pandemic showed Garnett Station could “navigate an uncertain economic environment,” Sloane said, something which has “resonated with the LP community.”
GSP 4.0, which is expected to do up to five platform deals a year, has yet to make a debut investment. Garnett Station’s latest deal, announced this month, was the recapitalization of Flagstop Car Wash, an express car wash chain. It also last year invested in the growth of Woof Gang Bakery & Grooming, a pet services and specialty retail franchisor.
Garnett Station has to date realized seven investments. The most recent is Ojos Locos, an Hispanic-focused sports bar concept backed in 2018 and sold last year to an unidentified private equity firm.
Perelman and Sloane oversee a New York-based team of 24 professionals. With the close of GSP 4.0, Garnett Station’s managed assets total more than $2 billion.