Exits 'Bittersweet' for Auspex Capital Dealmakers
Award winners from NRD Capital at last year’s Dealmakers gala luncheon. This year’s event is May 7 at the Rio Hotel in Las Vegas, a highlight of the Franchise Times Finance & Growth Conference, and will feature Auspex Capital and RGT Management among the winners.
We’re reporting many interesting stories this month about our Franchise Times Dealmakers winners, including Auspex Capital/RGT Management’s longtime relationship as investment banker and restaurant operator.
Auspex Capital’s Chris Kelleher and Naveen Goyal work with restaurant clients over their complete corporate life cycle, both on the long journey up and on the quicker but still time-consuming exit.
A prime example is Sean Tuohy, the Memphis-based restaurant owner who with operating partner Michael Roe built RGT Management into a huge Taco Bell, KFC and Freddy’s business over three decades, then spent the past two-plus years divesting 150 restaurants and 55 properties for an aggregate sale price of $213 million.
So which do the folks at Auspex like better, the ride up or the ride down, I asked, and they couldn’t come up with a pat answer. “It’s kind of bittersweet,” says Kelleher, when the client’s portfolio is sold. “We’ve had a long relationship with Sean. I went to his daughter’s wedding. When I go to visit him I stay at his house, and that relationship is going to be not as close,” he says, although he knows it won’t completely end. “I still talk to him all the time. We enjoy the relationships and that’s what we build our business on.”
Adds a philosophical Goyal: “It’s part of the journey. They’re going to have to build until it’s time to harvest.”
And then there’s this: “When you sell you make a lot more money a lot quicker.”
The divestiture work Auspex Capital did for Tuohy’s company was complex and time-consuming. “Our view of the world is that we spend a lot of extra time. This deal probably could have been sold in a one-shot deal to one large buyer,” Kelleher says. “But we felt that basically selling the assets to buyers that would value them most—whether that was a New York Stock Exchange REIT or an international p/e firm or a family office—we spent a lot of extra time and effort to find the right buyers for the right assets.
“Sean got significantly extra proceeds because we took the extra time and effort and did six different deals rather than just jam them into one guy.”
Kelleher and Goyal say they always spend time with clients on the emotional side of selling their companies, not just the financial. “The most important thing is you’re ready emotionally and psychologically,” says Kelleher. “We absolutely have the conversation early on. We say, look the market is good right now but it’ll be good later. Because you’re trading one set of issues for another.
“You get a big chunk of money,” he points out. “We’ve had guys who are comfortable trading significant risk” as operators “but then they get $50-, $60-, $70 million and it creates a lot of additional anxiety,” he says. “And then you’re a leader of a dynamic organization and if you’re still excited about this stuff and it’s all gone and you have a big, fat, bank account—they have to ask themselves fundamental questions.”
Auspex Capital/RGT Management and the 10 other Franchise Times Dealmakers winners will be featured in the April issue.