A mistake turned Kind Snacks into a multi-billion dollar company
This story is part of CNBC does it The Moment series, where highly successful people reveal the critical moment that changed the trajectory of their lives and careers, discussing what prompted them to take the leap into the unknown.
The first time daniel lubetzky accepted a significant investment of money to friendly snackshe made a big mistake.
Today, Kind is a big name in the snack industry, reportedly valued at $5 billion when it was acquired by food giant Mars in 2020. But in 2008, the company was much smaller, and money ($16 million, from a private equity firm called VMG Partners) was very important to its ability to grow.
There was only one catch: The deal required Lubetzky to sell the company within five years. At the time, he thought it seemed like a good idea. But after four years, Lubetzky felt he was still the best person for the job.
So, he made a bet that saved him from losing control of his company and ultimately enabled it to become a multibillion-dollar brand, he says.
He bought his company shares from VMG.
It was expensive, risky and time consuming. Lubetzky had to come up with $220 million for the deal, a combination of company cash and millions of dollars in bank loans. Any drop in Kind’s income could have meant a default on that debt, possibly costing him his company forever.
Negotiations lasted two years and culminated in 2014. Kind’s annual sales almost doubled that year, and when Lubetzky finally decided to sell the company six years later, it was worth billions, not millions.
Here, he discusses the decision to buy back those Kind shares, why he was willing to take such a big risk, and how he overcame his fears of regaining control of his company.
CNBC Make It: What were you thinking as the deadline to sell Kind approached? Why did you decide to buy back the private equity firm?
Daniel Lubetzky: It’s like when you go rock climbing. Once you get to one peak, you can see higher, and then you have to climb another, and then you see an even higher one.
That’s what happened to me. Four years into the deal, I realized that Kind could get a lot bigger.
My investors were pressuring me to sell the company and they were very anxious. My vision was to continue growing the company for many more years. And his vision was to go out there and get a return on his investment.
So we ended up buying them. Now, because I hadn’t pre-negotiated the terms to buy them, it turned out to be very, very expensive and very risky. It was a very painful negotiation.
How sure were you that your bet would pay off?
I had a very strong feeling, informed by our impulse, that this was not the end, nor the beginning of the end, but the beginning of the beginning. And I wanted to continue.
But that was a scary moment. What happens if something goes wrong? Then suddenly he’s in so much debt that he might even lose his company. I had sleepless nights. We probably had a $200 million loan.
I did a lot of research on what the company might be worth. [in the future]. It wasn’t just a total cowboy move, where he was doing it blind. I would call it a very calculated risk, a very carefully designed risk.
Still, things could have gone wrong. He could have lost the company. But I believed in Kind.
What would you have liked to know at that moment?
Mostly, I wish I had known that everything was going to be okay. There were many sleepless nights and a lot of tension until we landed the plane.
I also wish I had known in 2008 that when I do business with a private equity firm, it’s not their way or the highway. Once you attract investors, it is no longer your company. You have to remember that you are now a business that you and others own.
At the same time, it is your baby, and you should try as much as possible to preserve options for the future. Even if she believes that she knows that in five years she will want to do something, she will keep her options open. You never know where you will really be at that moment.
Where do you think Kind would be today if you hadn’t bought control back?
I think there is a possibility, or maybe a probability, that if we had sold in 2013, Kind would not have achieved what it achieved today. We would have been lost in a large corporation.
When you sell a business to a larger company, if your company isn’t big enough to be a separate entity, the big companies can’t get out of the way. They can really hurt the company they acquire. You see it all the time.
I remain a significant stakeholder in Kind today, and still guide them. We agreed with our partners at Mars that Kind will be a separate standalone platform, and Kind continues to grow in double digits.
It’s not just that you have achieved more financial success with this path. There’s a chance Kind wouldn’t have reached the tens of millions of consumers it reaches every day now.
This interview has been edited for length and clarity.
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