In a brave choice for a debut deal, Salt Lake City-based firm
The firm, which was formed in June 2007 to back profitable franchise companies, looked at about 50 companies before choosing to pursue HouseMaster, which was founded in 1970 and has about 395 franchised territories in the United States and Canada. The transaction includes equity of about 30 percent from Sopra Capital and rollover equity of about 20 percent for the prior ownership. There is also a seller’s note to be paid over six years; its size was not disclosed.
Brian Charlesworth, a partner with Sopra, told Buyouts that HouseMaster receives royalties on about $3 million in corporate revenue. Its own systemwide revenue is roughly $25 million and the company is profitable, he added. From here, Charlesworth said Sopra Capital would be targeting EBITDA of more than $2 million for HouseMaster within two years.
Even those who shun business news would know that the housing market has had a rough time over the last two years. But Bernie Brozek, a Sopra operating partner who will serve as CEO of HouseMaster, pointed to recent data that showed sales of new homes rose slightly in July. “We’re excited about the turn and think the market may have bottomed out.”
Kathleen Kuhn, who assumed control of HouseMaster in 2002 and will continue to serve as president, added that a tight housing market can actually help the company. “These conditions prompt people to be more vigilant about purchases,” she said. Kuhn also believes many smaller competitors are being squeezed and that HouseMaster’s size is an asset that is helping it weather the tough times, and even pick up market share in some areas.
Sopra Capital doesn’t have a conventional fund to invest from, although Charlesworth said the firm is considering doing so at some point, maybe within the next year. He said funding deals “isn’t a problem” for the new shop, which also has a merger and acquisition advisory business.
The firm’s immediate plans are to zero in on three to four deals per year. Its focus on franchises dovetails nicely with the talents of founder David Leoncavallo, whose other venture is FranSearch, the largest franchising executive search firm in the world, according to Sopra’s Web site.
“Every company we acquire, we’ll put top executives with extensive franchising experience in place,” Charlesworth said. “That really sets us apart.”