Italian Home Bakery: Finding a strategic buyer
Since 1955, Italian Home Bakery has been an active and highly-respected member of the Toronto baking community. In 1999, the business was acquired by two brothers, Dennis Rossetti and John Rossetti. Dennis was Italian Home Bakery’s co-CEO and COO, and John was the company’s co-CEO and CFO.
In the beginning, Italian Home Bakery was in the fresh bakery business, primarily supplying artisanal breads to major retailers including Loblaws, Sobeys and Metro. About a decade ago, however; the retailers shifted from selling daily fresh product to frozen product. In order to remain relevant and competitive, Italian Home Bakery had to adapt by developing a new frozen baked goods line. That’s when Dennis’ bakery experience came into play. He developed a frozen, thaw-and-serve or quick-to-refresh program. The products developed were fully baked and frozen. Retailers have the option of keeping the product frozen or refreshing it – which means baking it in an oven for five minutes, and it would be ready to serve.
The new products were a success. In 2011, the Rossetti brothers realized in order to expand, they needed to secure capital. There was interest from private equity firms, however, the firms did not share the brothers’ vision for the future of the company. The private equity firms were looking for rapid growth/rapid exit.
In 2015, the brothers found their strategic buyer in Grupo Bimbo, a Mexican multinational bakery product manufacturing company. Grupo Bimbo had recently purchased Canada Bread and an artisan bread manufacturing plant in California, and was looking for a similar artisan bread plant in the north-east to service the New York, Massachusetts, Quebec and Ontario markets. Talks began in April 2015 and a final agreement was concluded in July 2015, a relatively short time frame for completing an acquisition.
John claimed the actual search for a strategic buyer began long before 2015. He explains: “This process started back in 2011 when we realized we needed to expand through acquisition or by selling to a strategic buyer. You have to be ready early on in the process. It is critical that your financial records and forecasting processes are in order. The company’s cash position has to be monitored regularly and internal controls have to be in place. The quality and tenure of the management team is also very important. Your production facility must operate efficiently, and you need excellent relationships with a solid base of customers to establish continuity of business.”
John credits their success in finding a strategic buyer for their business to adhering to a well-defined business plan, and then moving through all the appropriate phases of the plan. He says they were supported by a strong team, particularly Italian Home Bakery’s comptroller, who was involved every step of the way. From the beginning, the brothers brought in advisors to ensure their vision for the company was unified. John explains: “From a long-term planning perspective, it was important that our decisions were based on strategic initiatives rather than operational efficiencies. We retained a consultant to coach us in addressing the strategic direction of the business and implementing the plan.”
John says it all comes down to being honest with yourself. “The most important thing is documenting your strategic plan in terms of where you see your company in two to three years. And be honest with yourself to say you are capable of bringing your company there. If you and your team are not capable of this, then you must make a decision. That’s the toughest part. You have to be in that frame of mind to say: I’m ready for the next move.”
John says any business should always be prepared for sale. “That phrase is commonly used, but misunderstood. When I say to an entrepreneur you have to get your company ready for sale, the entrepreneur says: “My company is not for sale.” I say, your company has to be for sale at all times. You’re either creating value for a potential buyer or you’re creating value for your own company. And if you’re not doing this, then you’re not operating a successful business.”