A Sparkling Success
Invested Banker to the Consumer Industry

A Sparkling Success

Description
TARGET: Method Products, Inc.
OWNER/PARENT: San Francisco Equity Partners, Simon Equity
COUNTERPARTY: Ecover Belgium NV
SEGMENT: Home & Auto
TRANSACTION VALUE: Undisclosed
CLOSING DATE: August 31, 2012
ROLE: Exclusive Financial Advisor

Founded in 2000 by Adam Lowry and Eric Ryan, Method Products Inc. (“Method” or the “Company”) was founded with a vision for a premium lifestyle brand that would disrupt the “sea of sameness” characterizing the home care category. With a unique brand proposition firmly rooted in “dark green” environmental principals, forward thinking product and packaging design concepts, healthy and effective ingredients and formulations, and a focus on vibrant fragrances, consumers quickly embraced the Method brand as an exciting alternative to traditional cleaning products.

Method continues to disrupt the $18BN home care category by bringing an emotional proposition to a rational category. Method is exploiting three major cultural shifts within consumer preferences including: (i) an increasing focus on health and wellness; (ii) a desire to create an appealing lifestyle within homes; and (iii) a willingness to pay a premium price for high quality home care products. Following rapid consumer adoption and enthusiastic support from Food, Drug and Mass (“FDM”) channel retailers including Target, Method experienced rapid growth, surpassing $100 million in gross sales by 2008 — faster than some of the most recognizable consumer brands in the world.

Method’s rapid growth continues to be fueled by the Founders’ dedication to fulfilling the brand’s potential and mission; the addition of experienced consumer industry executives to the management team, such as current CEO Drew Fraser; and growth equity investments from value-added financial sponsors, such as San Francisco Equity Partners and Simon Equity. The Company benefited from the leadership of a strong Board of Directors led by Chairman Tim Koogle (Former CEO, Yahoo!) and whose members included Pat O’Dea (CEO, Peet’s Coffee), Steve Simon (Managing Partner, Simon Equity) and Scott Potter (Managing Partner, San Francisco Equity Partners).

With sales exceeding $500 million, employing more than 4,000 employees in 80 countries, Kaz is today the world’s largest vaporizer/humidifier manufacturer and continues to be the most trusted name in the industry

“This highly successful outcome represents the culmination of a very important investment for San Francisco Equity Partners and all of our fellow Method shareholders. Method is a very special brand and Company and we could not have entrusted the assignment to a more capable and trustworthy steward of shareholder value than the Sawaya Partners team. Their strategic insight, tactical execution, grasp of critical brand positioning, and visibility into the mind-set of the potential buyer universe translated into a great outcome for all stakeholders. I look forward to SFEP having a long and productive relationship with the Sawaya Partners team.”

SCOTT POTTER MANAGING PARTNER, SAN FRANCISCO EQUITY PARTNERS

Today, Method is the #1 Green Cleaning brand in FDM channels in the U.S. as well as the fastest growing. The Company’s innovative and distinctive Home Care, Hand Care and Fabric Care product offerings are sold in more than 40 thousand retail outlets around the world. Method enjoys industry-leading consumer loyalty and highly collaborative relationships with flagship customers in key channels, such as Target, Kroger, Whole Foods and others.

In 2011, the Company received several inbound expressions of interest from potential strategic and financial buyers. Despite significant near-term upside opportunities from continued sales growth as well as a highly successful supply chain initiative, the quality of the unsolicited inbound expressions of interest was compelling. As a result, Method’s Board decided to explore a number of strategic alternatives, including a potential sale of the Company and a potential investment by an outside private equity investor.

Method’s Board believed that achieving a successful outcome for such a unique brand would require an equally unique investment banking firm to serve as its strategic and financial advisor. Given Sawaya Partners’ extensive consumer experience and track record of achieving industry-defining outcomes for leading consumer businesses, Sawaya Partners & Co., LLC was the Board’s clear choice for Method and its shareholders.

Given the fact that the timing of a potential transaction was initiated by external interest, it was important to Method that the transaction process was conducted in a highly focused and confidential manner. The following parameters were established to accomplish these goals:

  • Ensure confidentiality by identifying the highest quality candidates in the universe of potential strategic and private equity counter-parties who represent the most attractive fit with the Company
  • Maximize certainty by conducting a highly targeted duel-track process, allowing the Board and Sawaya Partners to perform a full evaluation of the available strategic alternatives in an expedited timeframe
  • Optimize process dynamics and buyer psychology by working closely with Management to effectively present the Company’s market position, financial performance and future potential to potential buyers/investors with a focus on the specific interests and capabilities of each individual counter party
  • Manage a diverse set of international and domestic counterparties with a wide range of priorities through a complex and intensive due diligence process, while allowing Management to continue to focus on the critical task of executing ongoing initiatives
  • Identify and engage in further exploration with a single party that best met shareholder valuation and liquidity expectations, as well as continuing Method’s vision of disruptive innovation through preservation of the Company’s unique culture and identity
  • Maximize shareholder value by negotiating highly favorable financial and legal transaction terms

Leveraging senior level access to the key decision-makers of the most qualified strategic buyers and financial investors, Sawaya Partners executed a complex exploration of a wide spectrum of strategic alternatives. Sawaya Partners’ unmatched storytelling was brought to bear in strategic interactions, which were customized to each counterparty. Sawaya Partners’ deep Home Care Industry experience, as well as highly efficient process management, enabled Sawaya Partners to deliver the highest quality strategic advice to Method’s Board, and ultimately, to make a recommendation that shareholders pursue a liquidity event with Ecover Belgium NV (“Ecover”) that had shown itself to be most capable of achieving all of Method’s critical transaction objectives.

Sawaya Partners was deeply involved in the execution and orchestration of every stage of the process from start to finish, beginning with assisting Method in evaluating the early expressions of interest in late 2011 to helping negotiate highly favorable financial and legal transaction terms and assisting with the closing mechanics of the transaction.

Not only does the sale of Method to European strategic buyer Ecover represent a highly successful financial outcome for Method’s shareholders and investors, but also the transaction ensures that the iconic Method brand will preserve its identity as the most innovative and disruptive brand in home care.

Ecover shares Method’s social and environmental values and mission and is committed to driving continued growth and success for the brand by investing in Method’s unique organization, people and culture.

The merger of these two businesses provides us with a strategic position in the US market – the largest and fastest growing market in the green cleaning category – and Method with a European partner with an unrivalled heritage, robust environmental credentials and ecological manufacturing facilities.”
Philip Malmberg, CEO — Ecover Belgium NV

The marriage of our two brands makes perfect sense, as we are both companies rooted in a deep heritage of sustainability, innovation, and making people’s lives healthier and happier.”
Drew Fraser, CEO — Method Products, Inc.

The Future:
The combination of the Ecover and Method businesses has created the world’s largest green cleaning company with over $200 million in annual sales and represents an industry-changing milestone for the Home Care Industry. Each party brings to the partnership highly complementary capabilities that are expected to drive rapid growth of the combined business, as well as the green cleaning category. Ecover brings to Method both an expertise in green manufacturing as the owner of two state-of-the-art manufacturing facilities in Europe, as well a deep understanding of the European market for green cleaning products.

“I am personally very excited about this acquisition as it will not only create the world’s most dynamic and visionary green cleaning company, but also establish a great platform for growth for both brands. By leveraging each other’s strengths, this partnership will support the elevation of the green cleaning category as a whole.”
Philip Malmberg, CEO — Ecover Belgium NV

“By coming together, our two brands will only serve to strengthen each other by providing complementary capabilities, an unrivalled opportunity for category-changing product development, and a united effort in building on our combined vision.”
Drew Fraser, CEO — Method Products, Inc.

The Method Management team will continue to run the Method Business as an independent unit and Method’s Founders and CEO will take on expanded roles within the combined enterprise, bringing their respective brand-building and environmental skillsets to support the Ecover business worldwide. Together, the Ecover and Method organizations see the potential to achieve greater business, environmental and social goals than ever before.

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