Acosta ADS Bare Escentuals Carter's Crown Castle EWS The Holmes Group

Acosta Sales and Marketing, founded in 1927 and headquartered in Jacksonville, Florida, is the nation's leading agency providing outsourced sales, merchandising, marketing, and promotional services to manufacturers of consumer packaged goods (CPGs). Acosta manages more than 125,000 SKUs for some 1,700 manufacturers and also services more than 120,000 retail outlets (ranging from club stores to health-food stores) and wholesalers in multiple distribution channels.

Acosta has grown significantly over the last ten years, reflecting increasing promotional activity by CPGs, ongoing outsourcing and consolidation among retailers, and an ever-broader range of services designed to help all their clients operate smarter and more profitably.

What did Acosta seek from a private equity partner?

As major grocery retailers consolidated, so did the food service agency sector. Acosta was a leader in this consolidation process. Acosta management, while pleased with their accomplishments, realized that the Company's multiple acquisitions and mergers had resulted in the need for a capital transaction to improve the balance sheet as well as to realign ownership interests. Additionally, management was facing a rapidly evolving market for their services, and was convinced that they could benefit from an experienced, financially oriented partner with deep operating insights to help them perform a comprehensive business review to ensure Acosta's go-to-market strategy was well designed to optimize performance. As a final objective, management knew that to smoothly handle their continued rapid growth they would benefit from being held to more professional "large company" governance standards, and believed that an institutional equity partner would facilitate this transformation.

Acosta's past success ensured a strong response from private equity investors. Management used the capital raising process to interview prospective financial partners on the substance of their investment experience in relevant sectors, as well as to understand their analytical and operating strengths. Relationship building and the style of decision making were also important elements to be considered. Berkshire worked diligently to meet their needs, and happily was selected as the preferred new investor to help Acosta realize its objectives.

Berkshire's role

In February 2003, Berkshire invested $150 million to facilitate the recapitalization and ownership realignment thereby becoming a minority investor alongside Acosta's senior management. Embracing their new partnership, Berkshire and management immediately undertook a thorough study of the business using Berkshire introduced external resources that helped redesign and improve Acosta's service offerings. Confident that this work helped prove the efficacy of Acosta's operating model to solve the needs of its CPG customers, management had Berkshire's full support to stay the course in the face of potentially conflicting competitive market signals early in the investment period. Patience was rewarded and today Acosta's services are well accepted by its broad group of clients as the Company has firmly established its industry leadership in both innovation and performance.

Outcome

The validation of the importance of Acosta's services to its customers have meant resumed strong growth. And the Company's scale has driven efficiencies that help improve all aspects of operating performance.

In 2006, Berkshire fully exited its investment in Acosta through a recapitalization led by management and another private equity firm. Acosta's shareholder base of over 200 active employees retained a significant equity investment in the business.

Acosta represents an interesting example of Berkshire's goal to be viewed as a value-added partner assisting management teams that need to make sure they are optimizing the performance potential of their company. Through Berkshire's own work, or work enhanced by the resources of proven external advisors, we feel well prepared to analyze the key business drivers that, when properly executed, will make a company successful. All of this progress can be made in partnership with management supported by a collegial and open governance structure.