Key Essentials, Inc. is a major developer and custom formulator of flavors and extracts for the food industry. The company was a privately held and has 25 years of experience in providing custom flavor formulating. Product specialization included flavors for gourmet coffee and tea, confectionery, sports and nutritional foods, bakery and snack, and new age beverages. 

The company had just secured a national account with a major retailer. The terms of the order called for a significant investment in dispensing equipment to be placed at the customer’s locations. The projected additional volume would require higher inventory levels and the owners forecasted a significant investment in accounts receivable. The company’s Anaheim California facility was operating at full capacity and they needed more production and warehouse space to adequately handle their growing business. 

Historically, earnings and capital contributions from the owners funded the company’s growth. Like many growing and entrepreneurial businesses, a majority of the owners’ personal assets were tied up in the company and the owners were concerned about additional risk involved with future personal investments. These factors led to their decision to locate a financial partner that could help the company meet their new opportunities.

How Mark Richardson helped Key Essentials 

Mark recommended an independent business valuation be prepared so the owners could evaluate the financial rewards if they were to sell or recapitalize the company. The process included an analysis of recent transactions in the food flavoring and fragrance industries and resulted in the conclusion that there were active buyers in their niche industry. 

Key Essential’s owners were young, enthusiastic and wanted to continue to manage the company. Mark knew the company would continue their marvelous success if financing were available and proposed to management that they seek a private equity group to back them. Mark also explained that Private Equity Groups could provide intellectual resources, experience and market relationships that could help management grow the company. This was especially pleasing to the owners because they believed a financially strong company with ownership interests in food or niche food products would be a perfect acquirer of Key Essentials. 

Mark prepared a customized offering memorandum for Key Essentials that highlighted the qualities that Private Equity Groups look for in their investments. The document outlined the company’s operating history, their growth forecasts, its markets, key employees and operating advantage. Mark also prepared a summary profile in “blind” format to protect the company’s identity. This document was sent to approximately 30-targeted firms with investments in food products. 

Mark privately marketed the company through his network of cooperating intermediaries, investment banks and merger and acquisition firms. One of these firms, Acquisitions Northwest was performing an acquisition search for a client seeking companies in the food category. The companies were introduced and investment discussions commenced. 

Key Essentials received four offers in 30 days. Mark helped the owners evaluate the offers and created an auction environment to assure maximum valuation. The company was sold to Jordan Industries resulting in significant personal liquidity for the owners. Mark Richardson and Northwest Acquisitions facilitated the transaction. The deal was valued at approximately $20 million. 

The company has relocated its operations to a new 40,000 square foot production facility in San Clemente, California and continues to be a leader in the food flavoring industry. 

Jordan Industries, Inc. is a diversified private holding company which was founded in 1988 based on a unique philosophy: to partner with entrepreneurs and their management teams to apply capital and strategic planning expertise to pursue aggressive organic and acquisition growth strategies. Since inception, Jordan Industries have acquired over 90 excellent companies around the world producing revenue in excess of $1 billion.

Jordan Industries’ mission in their flavor and fragrance group is to become the leading global provider of flavors and fragrances to small and mid-sized consumer products companies. Two previous acquisitions were Aromatic Technologies, Inc. in Somerville, New Jersey and International Fragrance and Technology, Inc. in Canton, Georgia, both in 1999.

About Mark Richardson