PEI OpEx Awards winner Americas: Arbor Investments - Rise Baking

Sept. 30, 2019

Arbor Investments' Rise Baking Company transformed five regional bakeries into one large North American bakery with a suite of products for in-store retailers and food service operators in its five-year hold period.

Arbor installed Michael Schultz, who had previously built and sol Best Brands in late 1999-early 2000, as operating partner, and together they launched Rise Baking with the acquisition of New French Bakery, an artisan bread manufacturer, in June 2013.

The Minneapolis-headquartered firm added Best Maid, a cookie and dessert bar manufacturer in 2014, followed by Hudson, another dessert bar manufacturer, in 2015. It acquired South Coast, a cookie manufacturer in 2016 and Choice, a dessert bar manufacturer in 2017, thereby transitioning to a high-quality bakery with a suite of products for its customer base.

"Arbor brought in big company know-how and resources that small companies like ours could only ever dream of," says Kent Hayden, president of Rise and former owner of South Coast.

Arbor provided legal and financial advisory to help Rise build the company. "They allowed us to run our business," Hayden adds.

More than 25 companies were reviewed for addition to the Rise Baking platform and the team focused on cultures that valued food safety, strong employee relationships and well-designed workplaces, according to Hayden.

Arbor consolidated the vendor base, reduced input costs and invested over $55 million to upgrade and expand Rise's manufacturing facilities. It also invested in R&D to create products for customer. The private equity firm also modified the sales team structure of the five acquisitions and made it sales channel-focused. This meant that all customers learnt of Rise's product portfolio of cookie, dessert bar and artisan bread, and the company had manufacturing assets from coast to coast.

The result? Rise added nine major customers that included Walmart, Albertsons, Costco and Wakefern, and 80 percent of its top 25 customers, including Panera Bread, Sam's Club and Target, began purchasing more than one product category.

"Arbor's investment in Rise Baking shows the importance of a solid thesis along with a combination of organic and add-on growth. Arbor recognized there was an opportunity to provide more flexible/customized baked goods and more new products on a national scale," says awards judge Steven Kaplan. "They then partnered with the right CEO to go after the thesis."

Rise delivered growth fulled organically and through acquisitions. EBITDA grew exceptionally from $4.8 million in 2013 to over $44 million in 2018; organic growth added $17.8 million in EBITDA, while acquisitions added another $21.5 million in the hold period.

Likewise, organic growth added $94.3 million to net sales in the hold period and acquisitions added $190.7 million to the $285.1 million of net sales during the hold period. The sale generated a 60 percent internal rate of return and secured a 7x return for Arbor's Fund III on its exit to Olympus Partners in August 2018.