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Airborne, Inc.

Background:
Airborne, Inc. ("Airborne" or the "Company"), headquartered in Minneapolis, Minnesota, is the maker of dietary supplements that support immune health. The Airborne product was developed in 1998 by a school teacher to help support her immune system. The supplement is made with a proprietary blend of 17 vitamins, minerals and herbs. The key ingredients in Airborne have been shown to help support the immune system as shown in scientific studies and medical journals. The Airborne brand emerged from its roots as a public relations and word of mouth phenomenon into a strong and sustainable brand with increasing brand awareness and an extremely loyal and vocal consumer following. Airborne pioneered the immune-support segment and remains the leading brand in the segment today with a line of products that can be found in major food, drug, mass and club retailers across the United States and Canada.
 
In 2005, Airborne was acquired from its entrepreneurial founders and the new owners pursued an accelerated growth strategy comprised of increasing mainstream distribution and advertising. In the next two years, Airborne's retail sales more than doubled, reaching approximately $116 million (as measured by IRI for food, drug and mass retailers, excluding Wal-Mart). During this period, Airborne consistently ranked as the #1 SKU in the over $4 billion cough/cold category (as measured by IRI for food, drug and mass retailers excluding Wal-Mart).
 
In 2006, the Company proceeded to encounter various legal and regulatory challenges alleging false claims made in association with the product's benefit. By the spring of 2009, the Company had concluded the various legal and regulatory matters and modified the brand’s messaging.
 
Fuad and the Sawaya team did a great job of designing a sale process that leveraged the very unique circumstances of the Airborne business, then ran it flawlessly. They identified and invited the right potential buyers to the process, shepherded the various and diverse constituents through a challenging approval structure, and brought the process to a very satisfactory conclusion. I have now worked with Sawaya Segalas on two very different transactions, previously on the sale of CNS to GlaxoSmithKline and now on the sale of Airborne to GF Capital. I continue to be impressed with their consistency in delivering the highest quality work, and creativity in providing advice for each unique situation. Importantly, Sawaya Segalas did what was right for the business and got the job done.
Marti Morfitt
Chief Executive Officer, Airborne, Inc.
Sawaya Segalas made our job as an investor much easier. Their intimate knowledge of the company, deep industry expertise and unique ability to clearly present relevant information greatly accelerated our diligence efforts and overall evaluation process. Further, it was evident that management entrusted Sawaya Segalas with properly articulating the story and to effectively serve as an extension of their team. Finally, from an M&A perspective, Sawaya Segalas acted as an efficient and fair arbiter, helping us navigate the complex process and keeping us focused on issues important for its client. These attributes together were critically important for this transaction given the deal's complexity and timing requirements. Without Sawaya Segalas' efforts, the deal would not have been successfully completed.
Erik Baker
Managing Director, GF Capital Private Equity
Fund, LP
 
Further, the brand faced a number of obstacles that contributed to a decline in sales that, among others, included: significant distraction associated with resolution of legal and regulatory matters, and meaningful reduction in consumer advertising.
 
In the fall of 2008, the original founders reacquired the Company and, soon thereafter, installed a management team comprised of former members of CNS, Inc, a publicly-traded marketer of consumer health products. The team is led by Ms. Marti Morfitt, former CEO of CNS, Inc. During her nine-year tenure at CNS, Ms. Morfitt and her team successfully completed a performance turnaround, returning the company to profitability and transforming it into a growing consumer health products company with flagship brands that included Breathe Right® nasal strips and FiberChoice® daily fiber supplements. CNS was sold to GlaxoSmithKline in December 2006. Sawaya Segalas advised CNS, Inc. on the transaction. (View CNS case study.)
 
Upon assuming leadership of Airborne, the new management team identified the cause of the business decline and pursued a disciplined stabilization and turnaround effort designed to return the business to growth and improved profitability. Key elements of the strategy included: reconfiguration and consolidation of the Company's supply chain, consolidation of offices and warehouses, streamlining the G&A structure, focusing marketing spending to optimize consumer messaging efforts and discontinuation of unproductive line extensions.
 
Objective:
In the spring of 2009, the Company sought to identify a new partner to recapitalize the business in support of management's turnaround and growth strategy. Having served as an advisor to Airborne for over three years, Sawaya Segalas was uniquely positioned to articulate the Airborne story and was engaged by the Company to approach prospective buyers.
 
There were a number of important considerations in devising an appropriate sale process: minimal management distraction, speed and certainty (such that a transaction could be completed ahead of an upcoming cough/cold season), and confidentiality (so as to preserve the option of a future sale process should a satisfactory outcome not be achieved). The situation catered to Sawaya Segalas' strengths in structuring highly tailored, targeted and expedited processes where depth of industry knowledge and high-level personal relationships with potential buyers are paramount in achieving a successful outcome.
 
Process:
Given the objectives of the Company and considerations in devising a fast and effective process, Sawaya Segalas recommended a highly tailored approach that would proceed directly to a management presentation, skipping the step of preparing a traditional confidential information memorandum ("CIM"). Such an approach (i) reduced the preparation phase and time to market, (ii) provided buyers with earlier management interaction, (iii) for strategic buyers, avoided layers of decision-making necessary for submitting initial indications, (iv) provided for earlier visibility into buyer psychology, (v) allowed tailoring of presentations, and (vi) efficiently solicited feedback. Sawaya Segalas had successfully used this approach in other processes such as those of Implus Footcare and Meguiar's.
 
In late-May 2009, Sawaya Segalas commenced the marketing phase and contacted a group of prospective strategic and financial buyers. This group was broad enough to provide an appropriate market check but targeted enough to allow for an efficient and expeditious solicitation process. The initial screening and qualification phase consisted of a brief executive summary document presented to prospective parties upon signing a confidentiality agreement and interaction between Sawaya Segalas and each party. On the basis of this document and interaction, a number of potential buyers were invited to attend an in-depth management presentation at the offices of Sawaya Segalas. Following the management presentation, parties were then asked to submit initial indications of interest ("IOI") in late June. Of the parties that were invited to attend the management presentation, over two-thirds submitted an IOI, reflecting a highly robust buyer screening process. On the basis of value, terms, rapport with management and Sawaya Segalas' assessment of a party's ability to proceed in an expedited manner, a subset of parties were invited to proceed to an accelerated diligence process. Following an initial period of due diligence, parties were asked to submit final bids in August, subject to limited confirmatory due diligence to be conducted in September.
 
As highlighted below, Sawaya Segalas managed a sale process following a period of meaningful brand decline. While the Airborne brand still maintained 3 of the top SKUs in the immune-support segment, heading into the sale process the brand experienced retail dollar sales declines in excess of 40% (for the 52-week period ending June 14, 2009 and as measured by IRI for food, drug and mass retailers, excluding Wal-Mart). Nearing the conclusion of the process, management's efforts began to bear fruit and the brand regained momentum. For the 4-week period ending October 4, 2009, Airborne's retail dollar sales grew in excess of 30%, double the rate of growth achieved by the overall immune-support segment (as measured by IRI for food, drug and mass retailers, excluding Wal-Mart).
 
Airborne Chart 2
 
(Click chart to enlarge)
 
Outcome:
  • On October 7, 2009, Airborne was sold to GF Capital Private Equity Fund, LP ("GF Capital"). Stockton Road Capital, LLC and Airborne management invested alongside GF Capital
  • Sawaya Segalas successfully structured and executed a highly tailored sale process, in a condensed time frame during a period of transition for the Company
  • The outcome achieved the Company's objective and positioned management to complete its turnaround of the business and fully develop numerous growth opportunities for the Airborne brand
 
Airborne
Client
Airborne
Brand
Airborne
Counterparty
GF Capital Private Equity Fund, LP
Segment
Personal Care, OTC & Cosmetics
Transaction
Sale of Company
Transaction Value
Undisclosed
Closing Date
October 7, 2009
Role
Exclusive Financial Advisor
 
 
OTHER PERSONAL CARE, OTC & COSMETICS DEALS
Case Study  CNS, Inc.
Case Study  Medtech Holdings, Inc.
OTHER SELL-SIDE DEALS
Case Study  Meguiar's, Inc.
Case Study  Implus Footcare, LLC
OTHER FAMILY BUSINESS DEALS
Case Study  Orange Glo International, Inc.
Case Study  Kaz, Incorporated (Braun)
 
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Featured News  Latest Airborne Commercial: Packaging Guy
 
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