The Sweet Spot
When Rose Confectionery went looking for backing, Melior Equity had an appetite for investment and a deal was struck that sees the current management team remain in place, writes
Rose Confectionery has been a great business for Richard Kennedy. The company has been trading since 1983 and distributes and makes all sorts of sweet things, from freeze pops to mallow wafers to macaroon bars. Kennedy (63) bought out his business partner, company founder William Grant, about a decade ago, and now he has taken some money off the table by selling control of the venture to Melior Equity Partners.
Kennedy and his fellow Rose shareholders had no financial imperative to make the deal happen. Operating company Rose Holdings has been on a strong growth path in recent years, with turnover of €24.2m delivering an operating profit of €850,000 in 2020. The balance sheet at the end of 2020 was robust, with total liabilities of €2.7m more than offset by €3.7m cash, and company net worth at year-end was €6.8m.
When Kennedy contacted Grant Thornton last autumn to explore his options, a trade sale would have been easy to line up. However, Kennedy isn’t ready to hang up his lollipop just yet. The same goes for shareholders and directors Phelim Daly (54) and Steven Watt (45).
With the private equity on board, the deal is that everyone stays in place, with Melior nudging from the sidelines. Eventually though, before the end of the decade, Melior will flip the business, and everyone knows that too. According to Kennedy: “I felt I have a bit more to offer and I hadn’t reconciled myself to just walking away. We’ve bought quite a few businesses down through the years, and I’ve seen it go pretty wrong for some people who sell.”
Melior Equity Partners was founded in 2019 by Jonathan Cosgrave and Peter Garvey. The duo previously headed up an Ireland-focused private equity fund for the Carlyle Group, investing in companies such as AA Ireland, Carroll Cuisine, Lily O’Brien’s and McCauley Pharmacy. Rose is the third investment for Melior’s Fund II. First up was broker BHP Insurance in 2021 and, more recently, Salmon Software in April 2022.
“We suggest to people like Richard is that they can have two bites at the apple,” Garvey explains. “You can get a significant chunk of money off the table today and de-risk yourself. If the plan we’ve all signed up to works out, you get a second bite of the apple when you sell the shares in five or six years’ time.”
Rose and Melior shook hands on their deal in mid-March 2022 and signed off on it on July 1 after a due diligence process that Kennedy described as challenging. That’s partly because much of the Rose business revolves around licensing agreements with brands. In recent years in particular, Rose director Steven Watt has been innovative in coming up with product ideas that large brands are prepared to align with.