Sun Capital Partners Inc. went on a restaurant buying spree during the past three years, acquiring such brands as Boston Market, Friendly’s, Smokey Bones and Fazoli’s. The Boca Raton, Fla.-based private-equity firm focuses on distressed investments, meaning it looks for an undervalued brand, orchestrates a turnaround and sells the holding, ideally, for a large return. It also takes advantage of in-house, experienced operating professionals to guide each portfolio company’s turnaround. Gary M. Talarico, a managing director at Sun Capital, led the purchases of Boston Market and Friendly’s.
How does the current economic environment change how you run your portfolio companies or your investment time frame?
We are living history right now; it’s unprecedented. Whatever people thought would happen, didn’t, and no one knows what will happen from here on out. It’s a time when you need to be very, very hands-on, which is good for us, because that’s how we operate.… And yes, this changes our time frame. It’s hard to sell companies right now, but we’re talking a delay of one to one and a half years, and on our investment horizon of between three and five years, that’s already factored in.
What do you consider when scouting a potential acquisition?
There are really three main questions we ask. First, if the trends are terrible, can you see a fix? Sometimes you just can’t swim against the tide. Second, is this a concept with zero differentiation in a crowded market? Does this brand have a reason to exist? And third, can you finance it? In this environment, that’s the hardest.
Do you see the credit freeze thawing soon?
It’s temporary. There is a lot of money on the sidelines right now. [But] it will flow back, and when it does turn around, it typically turns around with a vengeance.