Insights into trends in the capital markets, mergers & acquisitions and corporate finance for social enterprises. Issue II 1 In the News Top corporate finance-related headlines about social enterprises and impact capital 5 Social Entrepreneur Spotlight Interview with Matt D’Amour, Co-founder and CEO of Yumbutter on the merger with Ona Treats and RP’s Pasta Company 9 Impact Capital Corner Interview with Tom Groos, Partner at City Light Capital, a leading venture firm investing in early stage social enterprises 12 Selected Mergers & Acquisitions Transactions Social enterprises have been involved in mergers & acquisitions transactions as both targets and acquirers over the last twelve months 13 Selected Capital Markets Transactions Social enterprises across multiple industries have been active raising equity capital from institutional investors Cover Art: Bipolar Inspiration by Randy Nicholson | Artwork provided by ArtLifting ArtLifting is a social enterprise that empowers artists impacted by homelessness or disability. Through the sale of their art to clients such as Google, Microsoft and Staples, artists gain self-confidence that permeates all aspects of their lives. For more information, please visit: ArtLifting.com In the News Socially Oriented Fund Formation Natura, a Leading Publicly Traded Continues Certified B Corp, to Acquire The Body Shop from L’Oreal Several new impact oriented funds have been raised On June 26, 2017, Natura announced the acquisition of recently, heralding the continued growth of the sector. The Body Shop from L’Oreal for $1.1 billion in cash. The Body Shop has experienced limited sales growth from 2013 to 2016 (3% compound annual growth rate). Earnings before interest, taxes, depreciation and amortization (“EBITDA”) decreased by 31% and margins decreased by 500 basis points over the same period. The On June 7, National Geographic Society committed $50 transaction value represents multiples of 1.1x 2016 million, or 5% of its $1.2 billion endowment to impact revenue and 13.0x 2016 EBITDA. investing. The organization is expected to focus on research, education and exploration. Natura cited The Body Shop’s global footprint and multichannel distribution strategy as key drivers of the transaction. The Body Shop’s ethos, with its focus on natural ingredients and environmental responsibility, was also perceived as complementary to Natura and its Lux Capital launched a $400 million fund on February 28 previously acquired brand, Aesop. to back “impact inventors.” The fund makes early-stage investments in science and technology startups that are The combined company will have annual revenues of $3.5 “inventing the future without destroying humanity.” billion with 17,000 employees and 3,200 stores. The transaction is expected to close in 2017, subject to clearance from anti-trust authorities. Builders Fund, a private equity fund which brings an ESG focus to its investments announced it closed on $30 million of fund commitments on April 25 and expects to hold a final close in mid-2017. SJF Ventures closed its 4th fund at $125 million in December 2016. It will invest in high-growth companies creating a healthier, smarter and cleaner future. SJF Ventures typically invests $3-10 million in expansion-stage companies. Southern New Hampshire University has partnered with Rethink Education, to launch a $15 million seed fund focused on early-stage edtech startups. The partnership was announced in March and the due diligence team will focus on mission-driven entrepreneurs. Sources: Company press releases, Company websites, Keene Advisors estimates 1 In the News TPG’s $2B Rise Fund Makes First and Amazon to Acquire Whole Foods, a Second Investments Totaling $150M Leader of the Conscious Capitalism Movement The Rise Fund, a global private equity fund committed In June 2017, Amazon announced the acquisition of to achieving measureable, positive social and Whole Foods Markets for $42 per share (representing a environmental outcomes alongside competitive financial premium of 27%). The $13.7 billion transaction value returns, announced its first two investments in April and represented multiples of 0.9x LTM revenue and 10.6x May 2017. LTM EBITDA. The first investment, made in April, blbablablablblaba was in EverFi, an education technology company focused on areas of financial literacy, STEM, diversity training and workplace harassment training. The strategic benefits for Amazon are numerous, The $190 million Series D round included TPG Rise’s including: expansion of Amazon’s existing grocery commitment of $120 million, with another $30 million business, both brick-and-mortar and e-commerce, coming from TPG Growth. EverFi is at the intersection of potential overlap of Whole Foods and Prime customers; two of The Rise Fund’s seven focus sectors: education and and the potential optimization of the grocery supply chain technology. The company was founded in 2008 and to an omni-channel distribution for core Amazon operates a Software-as-a-Service (SaaS) subscription products through Whole Foods. model. EverFi will use the funds for international Social enterprises, particularly in the food & beverage and expansion and acquisitions. consumer products space, that typically sell through the The second investment, made in May, bla blablablabl natural channel will have to navigate changes to Whole was in Dodla Dairy, a fresh dairy blablablablab b Foods and also to their existing distribution relationships. company offering a wide range of milkblablablabla bl The announcement follows a campaign by activist products throughout South India. The company procures investor, Jana Partners led by Barry Rosenstein. Jana took its milk locally from smallholder farmers and has an active stake in Whole Foods in April 2017 and developed local distribution networks. This investment pressured the company to improve business performance corresponds to The Rise Fund’s focus on the agriculture and add new directors to the Board, and was also sector. Through its $50 million investment, The Rise Fund rumored to be pushing Whole Foods to consider a sale. In seeks to support the company in operating its June, the founder and CEO of Whole Foods, John Mackey, procurement network fairly, enhancing its brand and called Jana Partners “greedy bastards,” in response to growing its platform. their efforts. The Rise Fund is managed by TPG Growth, the global Whole Foods Market has had a robust history of corporate growth equity and middle market buyout platform of finance activity since its founding in 1978 and IPO in alternative asset firm TPG. TPG Growth Founder and 1992. In 2007, Whole Foods acquired competitor, Wild Managing Partner Bill McGlashan, U2 lead singer Bono, a Oats for $565 million and was required to divest a well-known activist and a special partner with TPG number of stores in order to comply with Department of Growth, and Jeff Skoll, a global entrepreneur, film Justice anti-trust concerns. In 2008, the company received producer, and impact investor, co-founded The Rise a $425 million investment from Leonard Green Partners, Fund. a leading private equity investor in the consumer sector. Whole Foods founder and CEO, John Mackey, is also a founder of the Conscious Capitalism movement and a co- author of the movements’ handbook, Conscious Capitalism: Liberating the Heroic Spirit of Business. Sources: Company press releases, Company websites, Keene Advisors estimates 2 In the News Danone to Divest Certified B Corp Lactalis Announces the Acquisition of Subsidiary Stonyfield Farms Stonyfield Farms Danone has been in B Corp-related news recently. In In early July, Danone announced that Lactalis is 2017, Danone announced the acquisition of WhiteWave purchasing Stonyfield Farms for $875 million, Foods and plans for the combined U.S.-operations, representing a multiple of 2.4x 2016 revenue and ~20.0x DanoneWave, to become a Certified B Corp by 2020. In 2016 EBITDA. early March 2017, Danone subsidiary, Stonyfield Farms, Stonyfield Farms, founded in 1983 and led by Gary also announced that it had become a Certified B Corp. Hirshberg was viewed as a leader in sustainable business However, in late March 2017, Danone announced that it along with the likes of Ben & Jerry’s, Tom’s of Maine, The was divesting Stonyfield Farms due to a complaint filed by Body Shop, Honest Tea and Patagonia. the Department of Justice regarding the acquisition of Danone made a 40% minority investment in Stonyfield WhiteWave and the anti-competitive nature of the Farms in 2001, took an 80% control position in 2004 and combined company with respect to the purchase and sale completed the acquisition with 100% ownership in 2014. of organic milk products. At the time of the initial investment, Stonyfield was generating $85 million in sales. The company generated Regulatory Note sales of $370 million in 2016. The Hart-Scott-Rodino (“HSR”) Anti-Trust Improvements Lactalis, a France-based dairy company, is one of the Act requires certain mergers, acquisitions, and transfers largest dairy producers in the world. According to the of securities to receive prior approval from the Wall Street Journal, other bidders for Stonyfield Farms Department of Justice and the U.S. Federal Trade included Dean Foods, Grupo Lala and Inner Mongolia Yili Commission in order to prevent any adverse impacts on Industrial Group Co. U.S. commerce. Over the last 10 years the Department of Justice has challenged only around 3% of transactions. Due to Danone’s strategic partnership with WhiteWave’s primary competitor,