MONE Y
Warner. “That was probably
one of the most empowering
moments of my career.”
The bet paid off: Urban Decay
expanded its business in the
U.K., and boosted its overall
revenue from $42 million in
2008 to $103 million in 2011.
Castanea sold the company to
L’Oréal that year—making eight
times its initial investment.
Dare to Question Everything
Buckıng consensus
has risks—and rewards
In 2010, co-
founder and CEO
Neil Grimmer sold
a majority stake
in baby-food
company Plum Organics to pri-
vate equity firm Catterton. Plum
also sold food for older children,
but only through a joint venture
with Revolution Foods, in a line
that used the Revolution name.
Industry consensus at the
time was that you couldn’t sell
food for infants and for 10-year-
olds under the same brand
name: “No significant baby
brand had ever successfully
extended beyond the toddler
market,” says Jon Owsley, a
partner at Catterton.
So Catterton took what
Grimmer calls “a total leap of
faith.” It ended the Revolution
venture, and rebranded the
product line for older children as
Plum Kids, betting that parents
who knew Plum from their
children’s early days would stick
with a familiar brand as their
babies grew up.
That bet worked: Plum’s
revenue went from $4.5 million
in 2009 to more than $81 million
in 2012. The following year,
Catterton sold Plum to the
Campbell Soup Company.
Though Grimmer sold his minority stake to Campbell, he continues to work as Plum’s CEO.
Shrink to Grow
Ditch what holds
your business back
In 2008, Catterton
invested in Resto-
ration Hardware, a
home-furnishings
retailer that was
struggling to grow profitably in
the face of mounting competi-
tion from the likes of Pottery
Barn and West Elm. Founded in
1980 by Stephen Gordon, who
left the company in 2005, Resto-
ration was a public company
until Catterton took it private.
The firm spent the next four
years shutting down Restoration Hardware stores, shrinking
the company’s retail footprint
from 110 locations to just
over 80, abandoning smaller,
mall-based outlets. Instead,
it focused on what managing
partner Michael Chu calls
“gallery stores,” which are
larger, multistory spaces that
emphasize the airy, aspirational
lifestyle Restoration Hardware
customers buy into as they shop
for its tastefully minimalist
couches and throw pillows.
The shrinkage and refocusing
helped double revenue, and
Catterton took the company
public again in 2012.
Scrutinize Every Partnership
Even the ones that
seem to work
In 2009, Castanea
Partners purchased
cosmetics com-
pany Urban Decay.
Chief creative
officer Wende Zomnir, who
started Urban Decay with Cisco
Systems co-founder Sandy
Lerner, says the private equity
firm “understands brands and
luxury retail.”
But not all of Urban Decay’s
partners have understood luxury
retail so well. The company,
based in Newport Beach, Califor-
nia, was having problems with
$523 BILLION
6.6% vs. 8.5% Revenue grew more slowly in 2014 at middle-market companies lacking PE backing, according to NCMM.
4.5% vs. 6.2% 2014 job growth in middle-market companies without PE backing trailed that in PE-backed ones, according to the National Center for the Middle Market. The total value of U. S. PE deals in 2014 was up more than 34 percent from 2010, when investment activity was still recovering from the economic crisis, according to PitchBook. ; ;
ILLUS TRATIONS BY MIRKO CRES TA
some distribution abroad: Its
makeup was sold by three British
retailers, with 70 percent of
sales at Boots, but Urban Decay
CEO Tim Warner wasn’t happy
with how the drugstore was
displaying the products. “It
wasn’t where we were taking the
brand, and I didn’t find it terribly
innovative,” he says.
He wanted to rethink the
partnership—and Castanea
agreed. Urban Decay pulled
its line from Boots, and focused
on its other two—much more
upscale—U.K. retailers, department stores Debenhams and
House of Fraser.
“Castanea said, ‘We all know
this is a risk, but we’re going
to be behind you,’” recalls
