Through a leveraged recapitalization, Sorenson Capital now counts child-focused portrait studio Kiddie Kandids among its group of portfolio companies.
Portrait studios are not too common an area for private equity investing. Aside from this latest deal, the last PE-sponsored acquisition in the industry took place in November 2004, when Piper Private Equity and Graphite Enterprise Trust PLC completed a management buyout to purchase the U.K. operations of Olan Mills, a child, family and makeover portrait photography chain with 73 retail studios across that country.
Headquartered in Sandy, Utah, Kiddie Kandids has more than 100 studios throughout the U.S., located mostly in the West and Southwest, and specializes in portrait photography of newborns and toddlers. About two-thirds of the companys locations are in Babies R Us stores, with the rest in malls.
This deal is right up our power alley, Steve Young, a co-founder and managing director at Salt Lake City, Utah-based Sorenson, told Buyouts. Our entire charter is to back, and work with, top-tier entrepreneurs and managers in the Mountain Midwest, and they fit that profile perfectly. They are an extremely fast growing business.
Fast growing as they may be, if Sorensons and Kiddie Kandids management have their druthers, the portrait companys growth will pick up exponentially. With the working capital provided by Sorenson, Kiddie Kandids plans to open more than 150 new locations over the next five yearsmore than doubling the 30-year-old companys current national footprint.
If you look at the demographics, we are still seeing pretty steady birthrates [in the U.S.], but [Kiddie Kandids is] also experiencing strong core growth in its markets organically, Young said.
This organic growth, added Richard Lawson, also a co-founder and managing director at Sorenson, is due to Kiddie Kandids quick adaptation to a digital format from the 35mm and medium format films that have historically been used at portrait studios. According to Lawson, Kiddie Kandids has been building on a digital base for the past 10 years and were one of the first in their niche to do so.
Digital photography allows [Kiddie Kandids] to maintain their high quality standards while vastly increasing their speed and allowing them to offer competitive prices because they no longer have to deal with the ancillary expenses that come with purchasing and processing film, Lawson said.
The owners are on the cutting edge of technology in their respective niche and have a cornerstone on the market-place in their operating areas, Young added.
Sorenson, which had been looking at Kiddie Kandids for the past year, is currently investing equity from Sorenson Capital Partners LP, a $250 million fund that closed in 2004. Lawson and Young declined to disclose the purchase price or equity-to-debt ratio for the deal. Young ceded that Sorensons equity stake fell between $5 million and $30 million. No intermediary was used to broker the deal.
Kiddie Kandids co-CEOs, Scott Adams and Wayne Fox, will retain their management positions and help grow the company throughout Sorensons investment period.