Our economy is driven by familyrun

businesses. 70 plus percent of the GDP

is generated through familyrun

businesses in the food, beverage, pet

wellness sector. It's a 1.3 1.4 trillion

market opportunity. So it's a big

market. I'm a family business guy. I

love businesses and I love families. And

every time we've sold a business, those

families have become investors in our

next fund. Welcome to Other People's

Money. I'm your host, Maxi, and I'm

joined today by Andy Yunane, founder and

managing partner at AUA Private Equity

Partners, which focuses on lower middle

marketrun businesses, and specifically

on making operational improvements in

their portfolio companies. Andy, thank

you very much for coming on the show.

>> Thanks for having me, Max. Excited for

the conversation.

>> Well, it's really hard to separate what

you're doing now from your experience in

your own family business. So for many

years prior to starting AUA, you were

the COO of Goya Foods. I'm sure many

people know Goya Foods. It's one of the

most successful Hispanicowned food

companies in the US. Talk to me a little

bit about your experience there and how

it was really the genesis behind the

strategy at AUA. Look, I grew up in a

family that had a familyun business. So,

a lot of kids like me, you know, we

worked every summer in Holiday since I

was in seventh grade. Getting to know

the business, getting to know the people

in the uh in the organization, you know,

it was nice to spend time with my family

on not just a social level, but uh a

work level. Um and you know, really

seeing what my father and uh was driving

and later my brother and uncle and um

but it was a great experience. You know,

it drove home what hard work is it does

for a company. What treating people with

respect, you know, um understanding

that, you know, putting out cons, you

know, consistent top quality product is

a way to succeed. You know, having um

strong family culture or strong

corporate culture, whatever that culture

is, is important moving forward. And I

love working with families. So you know

while I was at Goya I did a lot of you

know continuing education and research

in family businesses and uh that's what

led me to starting the firm after I

launched a family office in 2004 and

institutionalized that I realized that I

really liked working with families. I

love that culture and wanted to help

other families um you know transition

out of the business if that's what they

desired. So it was kind of really the

genesis of of what we decided to do at

AUA Private Equity.

>> Yeah. Well, family businesses in many

ways that that is the origin of industry

here in the United States. Obviously,

we've seen so much corporatization and

and the growth of companies to some of

the mega corporations that we have

today, but smaller family-owned

businesses have also gotten very large.

What is the market size like? and and

help me understand, you know, what

percentage of the the US economy uh

still operates in a family-owned

business?

>> Our economy is driven by familyun

businesses. Um I know in the value chain

that we um invest in, so that's

family-owned businesses in the food,

beverage, pet, wellness um sector. It's

a 1.3 1.4 trillion market opportunity.

So, it it's a big market. Um but

obviously the entire family business

community is much larger than that. Um

and again I think 70 plus percent of the

GDP is is generated through familyrun

businesses. I'm not 100% sure but I

think it's something like that.

>> So your specific segment 1.3 trillion in

uh you said it's food, pet wellness.

What what was the other one? And so it's

food, beverage, pet, wellness, and

co-manufacturing within all those

sectors. And that's in the size, right?

We we invest in, right? So that's, you

know, kind of families and businesses

doing 10 million to $40 million of of

Ebida or net cash flow.

>> So you were an operator. You hear this a

lot, private equity, right? We have this

operational expertise. We're going to

come in. We're going to improve the

operations of the business. how how true

that is differs from firm to firm, but

you know, you you really were were an

operator there. So, what is it that you

see with familyowned businesses despite,

you know, the size of many of these

companies that that they can improve on

operationally and and why do you think

that's an opportunity for investors?

>> There's lots of opportunities within the

family business sector and it's just our

model to help on the operational side.

Um, so we are putting moderate leverage.

You know, we've closed businesses with

no leverage because the family was

extremely adverse to any leverage and

then we were able to get them

comfortable with it. So, we put some

leverage on throughout the hold, but our

average leverage is kind of like three

turns of leverage. And as you're aware

in our industry, that's pretty moderate.

Uh, you know, some people are, you know,

five, six, seven, even up to eight

times, which is just where we're not

comfortable and and neither are the

families we partner with. we, you know,

we require those families to roll equity

back in with us. So, while we take

control of these businesses and buy over

50%, they end up being somewhere 15 to

45% of the business um after our

partnership. So, we have to respect

their wishes, too. And and we just, you

know, I've never worked in a high

leverage environment. So, uh what you do

in those businesses is different, right?

you're worried about covenants and uh

you know we're worried about longer term

uh experiences and and it's okay if a

quarter or two quarters um you know

don't go as planned. We still able to

pivot and get that you know straightened

out without having to worry about uh you

know restructuring the debt or the bank

you know hammering down on us. So um you

know we love this lower middle market

sector. Um there's many ways to exit.

You don't need to worry about the

market, the public equities and things

of that nature. So we feel there's

always a you know a buyer when we're

ready to to sell the business. We

usually are cleaning up and

strengthening the uh the management

team, bringing in outside exper

expertise, building a board of

directors, a true board of directors

that can act uh on advisory section

advisory um ways, means and then also

you know broadening out the seuite to

you know use you know open up our you

know rolodexes and uh help on the sales

and also on the on the uh performance of

the middle of the P&L where

[clears throat] you know operating a

manufacturing facility we've been able

to find anywhere from 15 to 30%

efficiencies in every business we've

we've partnered with which you know goes

a long way to increasing that that

middle of the P&L on an IBIDA basis.

>> What is the the family perspective on

the exit? Is this the the next

generation up doesn't want to run it or

they just see that the next stage of

their business is going to require an

expertise that maybe they don't have to

take it to the next level? It's a mix.

Each deal is differently. Sometimes the,

you know, matriarch or patriarch who's

running the business wants out in, you

know, 12 to 18 months and the next

generation just isn't ready. Um, we've

done two transactions where the family

has stayed in when we've sold the

business. We obviously can't guarantee

that and that's you know we're always

looking for the best exit for the entire

business and the shareholders but we

have been able to uh do two transactions

where the family stayed in after we sold

and in one instance and uh in waterlies

which was a a great uh a great

transaction for everybody and a great

family that we worked with. The second

generation was running the business when

we came in. uh Peter Lee and his wife

Luzia and you know they were moving

facilities and and expanding the

business and that's when we joined them.

Uh and when we sold that business the

the family Peter right we kind of took

out most of his parents and the the G1

um but Peter was able to roll personally

him and his wife more equity into the

next transaction than the entire

business was worth when we bought it. Um

so it can be anything right from there's

a transition when the family is out of

management management within a year uh

and we're professionalizing or even less

right um we've we've done one deal

transact transaction recently where the

management team was transitioned out

with the blessing of the family within

six months um and others as I mentioned

too where the the patriarch and and

matriarch of the family has stayed on in

management and has turned out to be

tremendous CEOs.

>> I want to switch a little bit to to more

of a a conversation around private

equity, the state of of the asset class

right now. So, you're in the lower

middle market. You alluded to the fact

that you are less uh reliant on public

equity markets for your exits, certainly

at the higher end of private equity. Uh

there's been a talk about how exits are

not happening. um people broadly got

overexposed to software and I think

there's somewhat of a reckoning there

but you know you you're focusing on hard

assets manufacturing

um and and a different part of the

market. How different is the tone in

private equity where you are versus

maybe some of the the bigger firms that

that get the the headlines that sort of

drive people's perceptions of the asset

class. there has been a a slight

slowdown in exits and transactions in

our size as well. We've been fortunate

enough to, you know, do transactions on

the buy side and have sold businesses

over the past, you know, year or so. Um,

but I think with the amount of capital

in private equity and in uh, you know,

family offices and people looking to buy

businesses where we are, you know, if we

build a business from $20 million EI

evida to $55 million of EBIDA, there are

plenty people in in that market looking

to buy a business and partner um, with

people to um, you know, grow to the next

level. So, we've been fortunate to have

transactions on the buy and and sell

side. Um, but it's would I like it to be

f, you know, a little bit more robust?

Absolutely. But I say that in every

market. So,

>> every everybody always wants deals to be

moving faster. There there's nothing

that can change that.

>> Uh, but I guess who who are the buyers?

I know we can't really talk about

specifics, but trying to understand when

when you're talking about a a you know,

you gave the example of a business that

goes from 25 to to 55 million in Ibida.

Who's looking to buy that? Is it other

higher higher up the market, private

equity firms, other families? Um who who

are these buyers?

>> All of our exits have except for one

where we orchestrated a management

buyout um with the management team and

and some partners that they brought in.

All of our exits have gone to either

larger sponsors, private equity firms,

or strategics. Um, and in the middle

there is are strategics that are backed

by private equity firms. Um, so I would

there are, you know, we're we're we're

buying businesses 10 to4 $50 million of

IBIDA. When you get from from us to

firms that are looking at businesses

from 30 to 100 $200 million of IBIDA,

there is a big pool and that ranges from

larger sponsors, sovereign wealth funds,

family offices, strategic uh companies.

Um it's a big pool of capital and as I

said, if we were seeing more deal flow,

we would transact more. They're in the

same boat. The more deal flow they see,

that's good deal flow, right? Um, and

hopefully that's what we're doing is

making these businesses better, more

institutionalized. So, a business that

we would transact on, maybe not just

because of size, uh, you know, isn't

institutionalized enough, doesn't have,

you know, KPIs, doesn't have the right

systems in place, um, you know, are

working with a a very small uh,

accounting firm and doesn't have the

information and data needed. when we,

you know, get in there and and kind of

bring it to the next level, these larger

firms are much more apt to transact on

companies like that.

>> So then I guess what do they see, right?

You're making all these improvements,

but I'm certain that the the buyers

probably have to look at what you're

passing over to them and say, "Oh, we

can do so much with this this too." So

what are the things that you kind of

leave for that next level of firm? It's

important to not scrape, you know, the

meat off the bone and you're leaving

somebody a flat business that won't be

able to grow at all. We've been, you

know, we stay in touch with uh the

families if they roll over. So, in those

two transactions where the family has

stayed over, they've been able to

continue to grow, which is important.

Um, and we try and build out a plan of

what's next for the next buyer. Um, so

we sold a a meat snack um

co-manufacturing business. We built the

business from $18 million to over 50 in

IBIDA. Um, but we had a roadmap for the

next buyer over the next two years to

build that from 50 to $75 million of

Ebida. Um, now that would require, you

know, capital expenditures and putting

in three new plants. Um, but the the

sales pipeline was there and the road

map was there. Um, it was just time for

us to move on and and for the next

person to take over. So it is important

for us to have a road map and a plan for

the next buyer to make sure that we

while we build a better business for

them, we also have a road map and a plan

for them to grow and make money as well.

>> Why not execute that plan yourselves?

>> Just transitionally where we are in the

fund, where we are with the deal. um you

you know and sometimes we just make the

decision do we want to hold the business

or do we want to and we have to sell

businesses right my job is isn't just

buying businesses and working with

families it's having a transition and

getting to an exit uh a successful exit

um you know our partners want it our

investors want it and the family we

partner with that was the goal when we

did it and we try and stick to our word

and when the time is right um and and we

think the markets are are correct and

we're getting a good value, that's fair

for both the buyer and the seller and

the family is on board. It just uh makes

sense for us to do it. Look, I'm a

family business guy. I love businesses

and I love families.

Uh is it is it bittersweet when we when

we exit some of these tremendous

businesses? Absolutely. But that's the

business I'm in right now. Will that

change in the future? Are there some of

these businesses that maybe under a

different fund structure or continuation

vehicle will be a business that we can

hold longer and and make our partners

even more money? Absolutely. But in the

in the industry and in the market I'm in

right now with the fund life and the

structure we have, we have to exit.

>> Yeah. PE people want out. People want

their money

>> increasingly so. increasingly so

[laughter]

after these uh slow periods of exits.

>> Yeah.

>> So let's shift again to the specific

sectors and the macro backdrop.

Obviously you're you're tremendously

focused on the micro at the businesses.

What are the operational improvements,

you know, specifically with that

individual family business, but you are

focused on these these four sectors for

a reason. their their demographic trends

uh that that are really driving, you

know, specifically Hispanic and other

other ethnic foods. And I think we've

all seen the the humanization of pets

trend, the way that that pets are, you

know, just getting more and more wallet

share um in the average family. So, talk

to me a little bit about the the

demographic trends and the other macro

factors that that have you excited about

these sectors.

>> We'll start with, as you mentioned, the

humanization of pets, right? We we have

run studies that you know maybe maybe a

little bit shocking to people but we

have you know we have studies that back

during the uh 2008 you know market uh

dislocation

people actually cut the budget on their

children more than they did on their

pets. Um, and and most recently we've

also run studies where the closer your

your dog or cat sleeps to the bed or in

the bed is how much more money you will

spend on them. So if if your dog sleeps

in a crate in the garage, you will spend

less on that dog than if he's in the

bed. He or she is in the bed with you.

Um, so we take that humanization element

that you're saying and right um, you

know, younger generations are waiting

longer to have children. Older

generations and baby boomers are

replacing their grown children with

pets. Um, and so there's all that around

it that the your pet and and the you

know your furry family members as some

people refer to them are getting a

larger share of that wallet share. So

that is a big demographic trend. And

then you know as you mentioned the

ethnic population is growing in this

country. I grew up in a Hispanic

business in a in a Hispanic Latino

family. Um and [clears throat] as the

population changes not just with

immigration and and Hispanics having

more children um and other ethnicities

having more children but it's also the

cross-pollination. Right. So, uh, my

wife is Irish Italian and now she eats

tons of Latin food and Asian food and

things like that. And when she was

growing up, you know, everything was,

uh, more just Irish food, right? Um, and

that's happening across the country. So

the ability for us through my background

and also you know our value creation

partners and and my my partners in the

firm understanding that that market

trend and how to attack and market to

that does give us a better opportunity

to expand and grow these businesses.

Right? I was always taught that if you

want to, you know, sell the whole

country, your management team should

have some of that cross-pollination

polization within the management team to

understand how to sell to everybody. You

know, when I used to be COO Goya and I

would speak across the country at

different events, I would always say,

look, I I could read as many books on

kosher marketing and kosher eating as

possible. If I didn't grow up in a

kosher household, I am not going to be

able to fully understand and grasp what

that culture is like and how to market

properly. And same thing with ethnic

foods. So that is, you know, one of the

other things we focus on. And even if

it's, you know, what somebody would

consider a a general market food

business, right,

Hispanic and the ethnic population and

and is growing. And if you can find

better ways to target market to those in

a cheaper way, right? For some reason

today, the same amount of people that

you can reach through TV on Hispanic TV

versus English TV. So price per eyeball

that you're getting is much cheaper

through Spanish TV than general market

TV. Um so we were able to extract those

things. And then the other thing that we

find very um exciting nowadays is better

for you healthy snacking foods. So as I

mentioned you know we we um transacted

on a meat snack business. So where the

trends seem to be going now and we think

are permanent and moving for a long

period of time is you know high protein,

high fiber, um healthier in that manner.

Um and you know then you layer on top of

that all the GLP1s, GLP2s and now GLP3s

coming to market. Um people are eating

less caloric volume but need protein and

fiber. So we we try and play in that uh

you know kind of ecosystem of where we

can have cleaner labels, better for you

products and healthier product to help

everybody um whether they are on GLP1s

or not. Um you know eat healthier and

and cleaner and and lead a healthier

longer lifestyle.

>> I'm certain that that probably is

affecting your view on beverages as

well. I mean, for so long the leaders in

the beverage space were arguably some of

the the least good for you um brands and

products. Um but there's also when you

look at the the the beverages that are

popping up, they're not from the

Coca-Cas, Pepsis. They're coming from

outsiders by and large. might eventually

end up at at those those companies, but

but the growth in the beverage market

does seem to be coming from Upstart's

new categories and generally focusing on

lower calorie um beverages. I mean, how

much is that playing out in in that

sector for you?

>> So, we haven't transacted in the

beverage space yet. We we look at it uh

all the time, but yeah, absolutely

right. Um, and and I think Pepsi has

done a very good job at trying to get

ahead of that and get on the healthier

side with some of their acquisitions on

the snacking side too with CIET, but on

the beverage side, absolutely. Um,

look, we are not as healthy of a country

as we should be and we have the

resources and the capabilities to be a

healthier country. And I think it's

inherent on our big food producers and

beverage producers and the middle market

where we consume and even the smaller

ones to be the the kind of catalyst to

help us get to a healthier lifestyle.

And we have the ability to do it. And

like I said, I think some of these

bigger companies are pivoting to that,

right? That comes along with price pack

architecture. You know, maybe smaller

sizes, less sugar, um better

ingredients, cleaner ingredients,

getting some of these artificial colors

and things out of our labels and and

ingredients. And

>> [snorts]

>> um I think it's important. And I think

while you are absolutely correct, most

of these are through startups and you

know lesser known companies that grow um

I think the trend will continue that

these big strategic companies will see

this as their growth opportunity right

you you listen to their you know their

quarterly calls and uh read their annual

reports the growth is not coming from

where it came from when we were growing

up or at least when I was growing up,

right, where um, you know, all these,

you know, sugary snacks and sugary

drinks were great, but people are are a

little bit more worried about long term,

right? The diabetes ep epidemic in this

country is is not what it should be. Um,

and and I I think they're doing a good

job. But yeah, absolutely we love that

sector and um we try we haven't while we

haven't done a beverage um we we have

done many on the food side and part of

the reason why it's harder to do on the

beverage side is there's less chemistry

and internal knowhow on the

manufacturing side and some of these

brands are high risk as they're growing

fast right we hear about all the good

ones right Lollipop and Poppy but I have

a stack back in my office of probably a

hundred that nobody's ever heard of and

guess what? Nobody ever will because

they're out of business, right? Um and

so we won't take that risk, but we in

that sector we will look on the

co-manufacturing side and what we have

found um and others are finding other uh

opportunities. But what we have found is

on the food side there is more science

and more manufacturing internal knowhow

versus on the beverage side which seems

to be more replicable.

>> Yeah. more about more about marketing

and and finding

>> finding that way

>> um

>> and and the binary outcome on the

branded side, right? Like I said,

Lollipop and Poppy and all that

beautiful stories and great, but for

every one of those, there's a 100 plus

that aren't going to make it. And we're

just not willing to take that risk.

That's asymmetric risk that that my firm

and my partners will not deal with. And

those those larger conglomerates that

you're talking about that are

recognizing these trends, are they

viewing it as something where they can

compete in the brand incubation or is it

a buy a buyout story for them and

they're just saying we need to change

our mix of our brands and it's going to

be a process over years of trying to

find these winners, get them at the

right prices and and hopefully grow

them. Um or or are they, you know,

incubating these types of brands

themselves? I think it's a mixture of

both. I think they are trying to make

their mega brands a little bit

healthier, um, more efficient pack

sizes, right? Um, and that's one way of

doing it. And then cleaning up the

labels on other ways. Some of this is

right not a big proponent of government

pushing private companies to do things

but I I think there is a push from the

government over the past decade or so to

push cleaner healthier living and and

the big CPG companies are reacting. Um

so I think that's one side and we've

seen the transaction right um they are

buying um businesses that are leading in

that space as I as I mentioned I hate to

harp on Pepsi but I think they've done a

great job um you know they bought CITe

which is a healthier snack food chip and

things of that nature poppy or lollipop

all those types of um you know

better for you kind of concept sodas

which with less sugar and some probiotic

or or natural properties that are

helping. So I think they do both. I

think they are trying to transition

while keeping the the high demand of you

know the product without trying to

change the taste as much. Shrinking pack

sizes. So instead of, you know, sitting

down with a 300 calorie bag of chips,

you're at 150, 180, 100, right, snack

sizes. Um, and again, that kind of

matches up with where the market is

going, especially as more and more

people are on these GLP1s, GLP2s, and

GLP3s. Um, that you want a a good snack

and and that's healthy for you, but you

also want to feel good about eating

something and something that tastes

good. If instead of 180 calorie, you

know, bag of popcorn, you're eating a

100 calorie bag of popcorn, that's

that's okay, especially if your your

caloric intake is down. Um, but so I I

think they do both. And they have to,

right? Because they have to can't

stop producing your winners, right? You

can't transition a huge battleship like

that overnight. Um, and I I think these

big CPG companies are seeing that and

and and we'll get better and better at

at figuring it out. They're smart smart

people.

>> Yeah.

>> Yeah. No, I want to ask about another

demographic trend and and that is the

the caring it seems like from consumers

about who is the owner and who is the

brand. And if you look back maybe in in

prior decades, people would have given

value to the idea that something was

owned by one of those mega brands. And

now it feels like the consumer,

certainly in my in my age demographic,

uh, values more that something is a

family-owned business, that it is

artisal or or perceived to be in that

way, that it isn't coming from a mega

brand. Are are you seeing that driving

interest in lower middle market brands

as consumers um view that as a as a sign

of quality um and and punishing more the

mega brands? Absolutely. And I think it

also goes to authenticity, right? I

think as I mentioned, right, there's a

cross-pollonization within the country

of people interacting, marrying,

becoming friends with all different

cultures.

Um, but I also think people travel a lot

more than they used to, right? My nieces

and nephews are are doing semesters

abroad, doing destination weddings

multiple times a year.

um you know to me a destination when I

grew up was going from New Jersey to New

York. That's not how this and then you

add the internet and social media um

that has really expanded and exposed

people to all different types of foods

and that authentic right food or

beverage is extremely important to your

generation and and all future

generations. So, I do think it is easier

for people to get their arms around that

this is an authentic family business or

an authentic product coming from a

smaller business that understands it to

its core verse a, you know,

multi-billion dollar organization that

is trying to get into a category that

seems it should be, you know, kind of

grassroots grown. Um, and that's why I I

I think these smaller companies have

done extremely well and why I do think

going back to the previous question, why

I do think there will always be that

ecosystem for the foreseeable future

where they will get to a size and breath

where a large CPG company has to buy

them out. And look, we've seen it all

along big, you know, big splash, you

know, press releases about, you know,

these big CPG companies buying them. And

then you see the other side of the

spectrum where they're buying them

quietly, don't want a lot of press

around it, and just put them into their

system to get distribution, get

marketing, and let them look like

they're still a familyrun business.

Right.

Well, and to the point, you know, I

remember the example of when uh Kors

bought Blue Moon and they were calling

it a craft beer and they they had to

change the packaging because they they

decided that that was disingenuous to

call Blue Moon still a craft beer at

this stage in its life. So, um you know,

talking about the the government forcing

private companies and maybe trying to

make sure that we are marketing these

these products accurately, it's it's

definitely happening. Um, I I want to

ask about what I I like to call the

mattification. Everything seems like

it's matte, right? Like the matte

packaging. It means it's healthy. It

means it's natural. It means it is

artisal. Um, what are the the marketing

trends that you're seeing? And you

talked about the internet and the way it

is changing how we how we find new

brands. Um, how much has the

distribution and marketing and branding

changed since you got into this industry

into where we are today?

Oh, tremendous. Look, when I when I got

into the industry, there was no

nutritional on on labels, right? So, you

didn't know what the the caloric count

was on anything, right? And there was no

expiration dates on most things, right?

So, that has totally changed. Um, and

for the better, right? It's a little bit

easier to understand what you're eating

when it's not just the ingredients. And

back in the day, you couldn't understand

or read the ingredients either, right?

They were uh multi-elabic words that

most people couldn't read or understand

what they meant. Um so that that's one

of the things. But yeah, people are

concerned about what they're putting in

their body. And I think that's a good

trend. And I think that is a big push as

to where we're going on labeling and

packaging and better packaging, right?

Um, you know, canned foods has found

better liners and and better processing

techniques. Frozen foods is growing and

growing, right? And within frozen foods

being able to be flash frozen at the

source versus, you know, being picked

and 3 days later processed and and

frozen. So, all those things go into

making these products a little bit

better and and as you call it, the

matification, right? trying to make

things look like they are healthier and

better for you and you know grassroots

more more closer to farmtot right or

farm to home uh within the the you know

retail sector so that has been a a big

change and I I think it will continue to

be um and look all companies the large

ones and the small ones do focus groups

on what works and what doesn't work and

that helps drive kind of the change and

the evolution of these processes.

[snorts]

>> But specifically talking about the

internet and the way it's changed

marketing mean has it changed the speed

to scale and how fast companies I mean

there are brands that it feels like

they've been around for 2 seconds and

they're everywhere and suddenly

ubiquitous on shelves across you know

and new types of retailers too. Uh I

never thought I'd be be seeing olive oil

sold in in coffee shops. Um but here but

here we are right. Um, and so, you know,

I I just wonder how uh the internet is

is changing marketing and and changing

the the operational playbook that you're

working with for a lot of of your

portfolio companies.

>> Sure. And and look on top of that within

the internet you have all these

influencers right where you know we had

a product that um uh you know that was

selling uh through Costco and all of a

sudden without our knowledge an

influencer picked it up and started

talking about it and our sales tripled.

I mean that's insane right? Um, and

there there's stories like that and

obviously that's how the marketing

dollars have moved more towards

influence and and and internet marketing

and things. But it's it's been a

tremendous,

you know, kind of gamecher as how firms

and how companies and how products are

marketed and speed to market.

Absolutely. Um, and again that comes

with risks and things of that, right?

Does it become a trend and all of a

sudden your sales triple and then die

out and all a sudden you built up all

this inventory for tremendous growth,

right? If if we did it for two months,

we're going to be able to do it forever

and where it's grown from there and you

build up inventory and and all of a

sudden it was, you know, a trend or even

worse, people don't like your product,

right? Which is the most important

thing, right? It's great to get product

out there, but it has to be something

people want to eat repeatedly and and uh

you know for a long period of time. So,

and you see stories about that, right?

Um but yeah, the internet and speed to

market has has evolved and and

accelerated tremendously. So when you're

underwriting a business and maybe we

could talk about that the deal flow

process about how how companies end up

on your desk and and what looks exciting

to you, you know, what are the modes

that you're looking for in this new

world with faster speed to market you

can have, you know, these upstart brands

um maybe even pre-product starting to to

market um to to your same customer base.

I mean, what is it that you're really

looking for to to come across an

exciting company?

>> Yeah. So sustainability and and you know

good family corporate culture within the

organization um and the ability to help

but within that I would say you know and

we touched upon it a little bit earlier

we won't take the risk on an upstart

business um that is growing tremendously

fast but we will look at that sector

right we've done it in protein bars in

uh um in meat snacks and other sectors

so when it comes to these areas that we

think are high growth and there are a

lot of upstart brands, we won't bet on

one of the brands, but we will attack

that from the co-manufacturing space.

And that kind of ties back to the last

question where you said speed to

marketing where in the old days the way

you would build your brand is by, you

know, having your own manufacturing, um,

scaling with that. Now, these Upstart

brands and the meat snack and the

protein bar aren't doing their own

manufacturing. They're they're

partnering with very qualified, very

good co-manufacturers

who can, you know, source the right

ingredients, work with the brands team

as to how to formulate those b those

products and how to get them to market

faster, cheaper, more efficiently um and

better. And so we have done that in

several spaces as I mentioned, right?

and not just in healthy better for you

upstart snack smacks snacks but also in

other sectors that are more stable. Um

so this co-manufacturing business has

really increased and on top of the

co-manufacturing is the private label

where there are store brands that are

being built more like brands versus just

generic lowquality cheap product for

somebody who can't afford the you know

the national brand. So that's how we

view that. And then on the branded side,

if it is a high growth area, we look for

families that have been in business for,

you know, a long period of time and have

stability and um the wherewithal to kind

of, you know, ride market trends and

have done it in in the past as as

changing patterns have affected their

business. Um, we've done that with um,

you know, Tropical Cheese, which is the

number one Hispanic cheese business east

of the Mississippi

and and several others, but that's kind

of where we where we kind of bifurcate

that.

>> So, a lot of the brands that that many

of us might be familiar with, newer

brands, they don't have their own

factories. You're saying they're going

to to these co-manufacturing facilities.

Um are you also

beyond just the manufacturing is there

any supply chain aspect where where you

have experience in in making sure that

the right ingredients if if the whole

thing is really branding a branding

exercise and we have the best

ingredients and we're sourcing from all

of these places

right yeah absolutely yeah yeah look we

when we were in the um protein bar

business so we owned a company called

True Food Manufacturing that did protein

bars granola

um and and chocolates, better for you

chocolates. We worked with our clients

who were you know national brands and we

helped them develop new products. So, we

had a a uh internal team called

Launchpad where we went out and did

research as to where the market was

going and we worked with all of our uh

customers and said, "Look, you have a

tremendous protein bar, but have you

thought about, you know, dark chocolate

or low sugar chocolate peanut butter

cups?" And then we develop the actual

product, work with their R&D team to put

it through, you know, uh, processes with

the best ingredients, um, the best

process and then come out with a new

product for them. Obviously, their input

is important, right? But we're working

on the taste profile, the ingredients

coming in, and the nutritional kind of

parameters that we're looking to get.

And we've done that with several of our

our of our um customers and launched

products for them that have gone from

zero to one of the top five SKs in their

system. Um and so that that involves the

entire you know uh supply chain from you

know sourcing to manufacturing to

distributing out and working with them

to do that. So yeah that's that's one of

the things in our toolbox that has

worked very well for us. You had said

something about one of your your your

past brands, how it was the the biggest

Hispanic cheese brand east of the

Mississippi. Uh how how much are we

still dealing with regional preferences

in brands and foods and how how much

nationalization of everything is going

on? Um and does that affect what is

exciting to you? Do you want a brand to

really have big national impact or or

can something be the winner in a

specific market and still reach the size

where it's it's really attractive to

you?

>> Uh so the answer is yes. I think it it

can go from regional to national. And so

for for this instance,

the Hispanic cheese business is

different than others because Hispanic

cheese and Hispanic food is is usually

targeted to the Hispanic community they

serve. So if you go east of the

Mississippi, it is much more Caribbean

and Central American versus you go west

of the Mississippi and you are much more

Mexican. So the cheeses that Mexican

community is eating is different than

the cheeses that the Puerto Rican,

Dominican, Cuban, you know, uh,

Guatemalan communities are eating. So

the reason we specify east of the

Mississippi is because these are cheeses

focused on those Hispanic communities,

right, as they immigrate or have been

here for three, four, five generations

like my family. Um, so, you know,

tropical cheese is focused on Puerto

Rican cheeses, Cuban cheeses, um, you

know, Dominican cheeses. Now, are there

other, you know, communities that eat

those? Absolutely. But they are

authentic to these countries and to

these, you know, c and to these

communities. So that when you know a

Puerto Rican comes to New York City from

Puerto Rico and they know that the

tropical brand is a true authentic qual.

Um, so that's why it's been

regionalized. Now, our goal is to either

through acquisition or through product

expansion build out that Mexican cheese

product. So, we can obviously we have

some and sell it within the eastern uh

coast. But to really extract value, we

would want to do an acquisition and and

possibly buy a Mexican cheese company

that we can, you know, really expand out

west.

>> So, even within your portfolio

companies, you're doing other add-on

acquisitions. It's it's not always just

internal uh development of new products

and SKUs. Sometimes it is better to go

out there and just buy something that's

existing.

>> Yeah, absolutely. And and again, same

thing just like the the conversation we

spoke about earlier with larger CPG

companies, it's it's an equation. Is it

cheaper to build or to buy? So for

instance in the uh in the true food

business in the um protein bar

manufacturing business we did a a small

acquisition but got us you know one got

us into other brands to manufacture for

but also got us into other types of

manufacturing right so there's extruded

there's baked there's all different

types of protein bars out there and for

us to build the the um facility that we

would need to get into the extruded

product would have been much more

expensive and timeconuming and we would

have had to go out and get customers

versus buying a business that had that

different manufacturing technique, had

the facilities, had the customers and

had the wherewithal and the knowhow to

to manufacture that way quickly and and

efficiently.

>> So I I want to shift back as we close

out here to to some some bigger trends.

So obviously you you have a a finger on

the pulse of what's happening in

manufacturing in your specific sector.

There's been a lot of talk about

re-industrialization here in the US

bringing manufacturing home. I don't

think it's going to look how it looked

20 30 years ago even if we do build new

factories. So what are you seeing in

terms of the way ma is manufacturing

coming back to the US? And how are these

factories and maybe even existing

factories looking different than they

did over the past decades? what is uh a

manufacturing renaissance here in the

United States going going to look like?

>> Yeah. So I I I I think some of that re

you know bringing manufacturing back to

the US is in sectors we don't play in

right larger automotive industrial steel

things like that. I don't think it

really left our our country that much on

the food side. Now it did in some

aspects. It went to you know Mexico,

Central and South America. But I think

in all aspects as manufacturing comes

back to the United States, I believe it

will be, you know, especially on the

food side, cleaner, more efficient, less

waste. Um, manufacturing that's better

for everybody, right? Safer. Um, right.

We when we we bought a food company

maybe 10 12 years ago called Ray Windows

that did snack cups and stuff you know

gelatins fl

things things of that nature um branded

business did great um but the machinery

was old machinery was tired the

employees weren't focused on safety so

when when we went in there and kind of

built out the ecosystem that you know

quality matters of of course waste water

and waste going into the ground is is

one things we need to focus on to reduce

that safety measures where you know if

you see somebody walking around a wet

manufacturing floor with other anything

other than you know the right footwear

you need to bring them aside you know

gently and respectfully and say hey

we're worried about everybody's safety

you need to put on the right footwear

and that kind of ecosystem and we went

from a system that had, you know, one

minor uh some sort of minor event that

would shut down a line of somebody

cutting themselves or or slipping and

falling. It would happen once or twice a

month when we got in there and we

started changing the culture, right?

Knowing what your food safety score is.

Everybody on the floor should know what

our goal is, where we're at, how we're

going to get to the right food safety

scores, right? We went from one or two

events a month to we went I think at our

peak 680 days or something without any

minor event. And that bleeds down into

the culture and everybody works together

to make it a safer, cleaner, more

efficient manufacturing uh facility. So

I think that will happen as things come

more onshore and I think the workforce

that's going through that and on the

line will be driving that as well.

Right. Nobody likes nobody likes working

in a dirty um unsafe uh uncommunicative

environment. So I I think as people

become more educated as they um enter

these things and as wages increase

that's the other thing we found is right

if you can increase wages to a living

wage it may look like it's going to be

an a more expensive widget at the end of

the production line but in reality

you're building a better culture. You're

having less turnover. It costs money to

train people no matter what they're

doing. And it, you know, ironically, it

costs much less for that product at the

end when you pay people better um to to

do the work and you have happier

workforce, right? That's one of the

things we're very proud of is building a

happy workforce where people are happy

to do their job and they're happy in the

c culture they're in, which leads to

cheaper recruiting, right? Because when

people go home and they say, "Yeah, I

love my job and I love where I work."

When you're looking for, you know,

somebody who's retired to be replaced,

your internal employee base ends up

becoming recruiters for you.

>> Now, I know that your deal flow, you

know, you're looking at hundreds,

multiple hundreds of companies to get

into a a handful of deals. So, it's not

like these things uh jump off the page

at you. Are there things like this where

it is you look at a company, they have a

good product, they have a good brand,

you're like, "Man, I can't believe they

use that facility. I know that facility.

They suck." And it and it just kind of

is like, "Oh my god, if we just move

them from there to our to our guys over

here, it's going to like the efficiency

is just there on day one of making this

type of change." What are the the sorts

of levers sometimes that you can look at

like this and just be go like, "Oh my

god, they get you so excited. Yeah,

look, I think it's all that. I think

it's finding companies that there are

opportunities that you just miss, right?

You can't see the forest through the

trees. And I I think that is one thing

that happens in family businesses,

right? You're making 10, 15, 20 million

a year, you know, if you make 18 one

year, 22 the next year, everybody's

still fine, right? Whatever that number

is. And you know what we what we try and

convince families of and we've been very

good is while you run a very good

facility, you have never seen

best-in-class. And we will show you what

best-in-class is. And as I mentioned,

we've we have been able to in every

facility we have gone into um increase

uh efficiency in that plant by a minimum

of 15%. In some cases, we've been able

to increase it by 30% without any capex,

right? Significant capex, just focusing

on, you know, where the bottlenecks are.

Um, staging employees coming in. Um, and

so we find those all throughout the

family business ecosystem. And then to

your point, right, can we find a brand

that has co-manufacturing

in in subpar what we think are not the

best facilities, but has worked for that

family for the past 20, 40, 50, 60

years, and it's working. But can it work

better? And that's where we have really

found uh value.

>> You're dealing with a delicate balance

here of trying to tell companies that

that what they have is great, but it

could be better. I mean, how much is is

speaking the language to be able to to

get through to these people without

insulting them, hurting their feelings,

making them feel like the work that

they've been doing um is valuable, but

but could be worth more.

>> We are buying good businesses, right?

So, and we want the families to roll

over because we we we think they are

extremely important to the future of the

business at least during our hold and

maybe even beyond that. Um, so we're not

walking in and telling people, hey, look

at all you've done wrong and look at

what we can do better. We are here to

tell them, look, we think we can help

around the edges. Partner with you. We

need to learn from you. Hopefully, you

can learn from us, but there are things

that we think we can do better. And

luckily for for me and my team, it's

getting easier and easier because we've

transacted with 29 families now. Um, and

every time we've sold the business,

those families have become investors in

our next fund. So, they've taken the

proceeds they've taken and said, "Hey,

Andy, AUA team, we love what you did. We

saw the respect you treated us with as a

family, the respect you treated all of

our employees with, and we we agree with

your business model there. This is a

sustainable, replicable model. We want

to invest with you." Um, so that's just

one thing, right? We are buying good

businesses. We just think we can make

them better. And sometimes it's just

right the next generation has no desire

to be in the business, doesn't have the

capabilities and the and the the earlier

generation understands that or it's just

time and the family doesn't want to get

into fights or there is fights about the

future and they need a impartial arbiter

to come in and say this is how it should

should be moving forward. So, it's

different techniques and and for each

different situation, but I will say the

the one line that goes through each one

of the techniques we use is [snorts]

honesty, upfront communication, and a

true understanding of what we want to

do, how we want to do it, and make sure

the family we're partnering with is is

buying into it.

>> We talked about demographic trends

earlier. There's been a lot of talk

about the great wealth transfer that's

going to happen from the baby boomer

generation to these next generations.

How much is that creating opportunity

for you? And then maybe if you could

talk a little bit about your experience

having started your own family office.

What are some of these um things that

that families should think about not

just in the transition of maybe their

business to a new structure, but also

just their wealth in general and and how

it should be managed. First off, yes,

the opportunity is huge because, right,

baby boomers are retiring and I can't

remember the number, but it's trillions

of dollars will be transferring over the

next decade down to the next generation.

And so one of my one of our operating

value creation partners um gentleman

named Tim Habashan um just wrote a great

article

um talking about how to handle sudden

wealth and it was driven by the whole

SpaceX you know IPO and the 400 people

who become multi-millionaires with

liquidity overnight. Um, and that has to

be something, not has to be, but should

be something in my perspective that

families should look into, right? I

always talk about I don't have kids, but

I have, you know, nieces and nephews, 16

nieces and nephews, and I always talk

about my desire is to make sure none of

those kids become trustarians, right?

They should be productive

um, you know, insightful members of the

community that produce and and that's

the goal. And I think most families have

that who have a family business want

their children and their grandchildren

to be productive members of society. Um

so I think that takes planning right and

so um and that's working with adviserss

and and attorneys to make sure that

transition because a lot of times

families can be extremely wealthy with a

family business but have no liquidity.

Right? It happened in my family. We the

a as we started creating wealth, we

still had no liquidity for at least a

decade, but the business was worth a lot

and you see that also in the farming

community and in the family business

community. So I think it's important

that you build strategies to handle that

and then each family will handle that

level of communication, right? There's

no one right answer as to how to

communicate that. I will say there are

wrong answers, right? And I've seen it

in in in my business where, you know,

we've talked to families and I'd say,

"What's your transition plan and what's

your estate plan? How do you want your

kids to see this?" And when I hear,

"Well, when I die, they'll figure it

out." Not, that's a wrong answer, right?

Um, but there are different ways to do

it correctly. And you know whether you

start introducing your kid into the

family business and you know what wealth

means when they're in fifth, sixth,

seventh grade or even earlier as I was

done it that works right but there's all

different strategies throughout that but

it does take planning and it is

important um to think of both things not

just exiting your business but what

you're going to transition into right so

Tim who I mentioned Tim and I have

written several papers on you know

enterprising families, right? Went from,

you know, you go from a family business

to an entrepreneurship or or you start

as an entrepreneur and you build a

family business. But this enterprising

family unit is important because that

gives everybody the ability to be

enterprising within the family

ecosystem. Even if they want to be a

philanthropist, a musician, an actor, a

teacher, uh an artist, uh a business

[snorts] person, a lawyer, everybody has

something they can be enterprising

about, but your brain, your body,

everything needs to work towards being

enterprising and productive and and

that's really what we try and advise

families with as well. Are you helping

people set up family offices themselves?

Whether it's a single family office in

the case of maybe a larger size business

or or helping plug them in with multif

family offices that that you know and

trust and your families your your prior

portfolio company families have worked

with in the past.

>> We have and I have uh and you know so if

you look at our value creation partner

team nine men and women who help us um

you know dive in on an operational side.

Three of those nine are family business

experts. So I mentioned Tim um Mike uh

works at my family offices and helped me

build my family office and then another

gentleman Francois de Visher. Um so

Francois and Tim were family business

consultants their entire career and then

Tim eventually went in-house and works

and runs all the family business and and

family uh um education programs at

Fidelity. Um, so we have and I have, you

know, advised families on whether it's

right to start a single family office or

more or often than not, you know, maybe

start with joining a multif family

office and then building up the e

ecosystem and the understanding of what

you want your family office to be and

then you can split off and and do a

single family office or build out your

own multif family office. start with

your single family or find other

families in your in your uh in your kind

of category that want to work together

with you. But we have done that uh

several times.

>> All right. Well, we'll close out with a

with a final question about what the

future looks like. Obviously, there

there always new developments that you

can't talk about, but in terms of what

you can share with us today, what is the

the near future looking like for AUA?

>> Yeah, so we have a couple of businesses

that we hope to sell over the next year

or two. We are looking at at taking one

of our businesses and putting it into a

longer structure. As we discussed

earlier, is a a healthy better for you

snacking company that we really like.

Have done very well in a short period of

time, but there's an inflection point.

We've owned the business about two and a

half years. We think there'll be some

slight growth over the next two to three

years when we would normally exit, but

there's the ability to really inject

some fresh capital and expand into other

sectors. Um, and the structure we're in

right now doesn't have that much capital

left. So, we're thinking about putting

this into a new structure to hold it for

another 5 years or so. Um, and really

partner with the family to get a uh

longerterm hold. So, our existing

investors will get a great return. Um,

and hopefully uh the new structure will

give new investors and people who want

to roll another ability to, you know,

double or triple their money from this

point. Um, and then just like always,

right, looking to keep the team happy

internally, keep our family partners

happy, keep our investors happy, and

everything we do is trying to build the

right culture to continue to make money

in an ethical and repeatable and and fun

way uh with families that we love

working with.

>> All right. Well, you you mentioned uh

that your your partner had written some

articles. Where can people find this

type of thought leadership from you

guys?

>> So, he's on LinkedIn. uh Tim Havshan uh

and uh obviously connecting through

Fidelity, but um in our website we we

post some of these articles as well. Um

but it's uh it's just been a pleasure

working with families and we love to try

and put out as much information as we

can to help them whether they work with

us or not. And um look, we've we've

spoken to a couple of families over the

past year or two and and we haven't come

to a transaction, but we still talk to

them regularly and try and help them

build their businesses. Right? I'm a

family business guy. I want I want

family businesses to succeed whether

they are in a transition with our firm

or another firm or just trying to get to

the next generation in a successful way,

which is beautiful if we can do it.

>> All right. Well, Andy, we'll leave it

right there. Thank you so much for

joining the show. Thank you, Max.