North Castle Is Open To More Turnarounds

  • Mid-market firm will back struggling companies
  • Turnaround of Atkins inspired confidence
  • Focus on healthy living

North Castle Partners, the Greenwich, Conn.-based shop that’s carved a niche for itself as an investor in companies that promote healthy living, is open to doing more turnaround-style deals, according to Managing Director Lou Marinaccio.

The firm’s interest in such deals should be welcome to the ears of investment bankers who shop small, struggling companies. There is a fairly limited universe of private equity firms willing to wade into distressed situations, and typically, as with firms such as Sun Capital Partners or KPS Capital Partners, turnarounds are their core strategy.

Marinaccio, speaking on a panel at a May 8 Association for Corporate Growth breakfast discussion on “successful revitalizations” of companies, said the firm’s interest in thornier deals is partly based on its success with Atkins Nutritionals. The firm bought the beleaguered diet company in 2007 in a deal valued at $100 million and, after an extensive overhaul, sold it in 2010 for $301 million, generating 5x its invested capital.

On the sidelines of the conference, Marinaccio stressed that while the firm’s core strategy of investing in companies promoting health and wellness isn’t changing. “But,” he added, “we’re not afraid of those situations.”

Typically, North Castle seeks control-stake investments in North American companies with revenue of $10 million to $200 million. The firm recently started raising its fifth fund, for which it is seeking $250 million, Buyouts reported in April.

Specifically, North Castle targets companies in the “health, wellness and active living sector,” which it says on its Web site represents an almost $1 trillion market of consumer companies that is “highly fragmented,” which means there’s ample opportunity to build companies through acquisitions and other means. The firm’s current portfolio includes Cascade Helmets Holdings, a maker of helmets and eyewear for lacrosse players; Flatout, a brand of low calorie, high protein flatbreads; and Palladio Beauty Group, a marketer of herbal and vitamin-enriched cosmetics.

Marinaccio noted the firm has a large stable of former industry executives who are critical in helping North Castle evaluate and execute on its deals. According to the firm’s Web site, it has 14 such operating executives and advisers who have held senior positions with companies in the consumer, retail and organic products sectors, among others. Indeed, the operating team outnumbers the senior investment team, which has five professionals.