Carr, Riggs & Ingram Capital Advisors (CRI Capital Advisors) acted as the sole investment banking advisor Mega Group USA with its merger with Nationwide Marketing Group. This acquisition formed an $18.5 billion marketing and merchandising powerhouse that represented more than 5,300 independent appliance, electronic, and furniture dealers operating over 14,000 storefronts.
Mega Group USA, and its parent company, PGR Management Inc., was comprised of a $3.5 billion home furnishing buying group that consisted of more than 1,700 independent appliance, furniture, mattress, electronic, and seasonal/outdoor furnishing retailers. The company provided a robust technology platform and extensive suite of traditional buying group products and services that enabled them to be among the premier independent retailer buyer groups in the United States. Mega Group was unique in the sense that its corporate structure mimicked that of an employee stock ownership plan (ESOP). The primary shareholders of the organization were its employees.
Due to the constrained nature of the corporate structure, Mega Group was interested in assessing its current operating strategy and reframing its shareholder structure. CRI Capital Advisors was brought in to help consult and identify a buyer that would not only unwind the current shareholder structure but also be committed to avoiding any actions that would diminish the reputation of the organization. With a target valuation and primary end goal, CRI Capital Advisors identified four essential targets that they felt were necessary to achieve a successful acquisition:
- In an effort to enable more aggressive reinvestment and future growth, the ESOP structure must be eliminated and ESOP-related financial constraints removed.
- Maintain equitable treatment of all shareholders to help position and incentivize the existing senior management team and employees to remain with the company post-closing of sale.
- Due to the hyper-competitive nature of the industry and sensitivity of buying group members, strategically avoid key competitors within the same market.
- Rather than a broad auction, conduct a surgical approach to marketing as a means to maintain strict confidentiality.
In order to preserve confidentiality, CRI Capital Advisors aggressively marketed Mega Group USA, primarily to private equity and family office acquirers. Although a number of reputable offers were received, none achieved the desired valuation that could be agreed upon by the majority shareholder trustee. Nationwide Marketing Group, the company’s primary competitor, was soon identified as a potential acquirer who would be most likely to achieve the target valuation for the company. On behalf of the executives, CRI Capital Advisors approached Grid Iron Capital, the lead financial sponsor for Nationwide Marketing Group, with approximately $1.7 billion in assets under management. This particular acquisition proved to be one of complex nature, due to the necessity of unwinding a traditional ESOP structure, navigating the delicate process of selling to a direct competitor, and having the transaction contain attributes of both a sale and a merger. After closing, senior executives were retained and able to participate in the ownership structure of the newly merged company. Although the final sale was made with a direct competitor, Nationwide Marketing Group was just as committed to preserving the reputation of the original company as were its shareholders.