Equity Firm Buys Potpourri Holdings

During the past four years, Potpourri Holdings has acquired seven catalogs, bringing its stable of titles to 10. But in October, the Medfield, MA-based gifts and needlecrafts cataloger itself was acquired by Linsalata Capital Partners, a private equity firm based in Mayfield Heights, OH.

Terms of the deal, which is Linsalata’s first catalog investment, were not disclosed. Potpourri had been a portfolio investment of Miami-based HIG Capital, which bought a majority interest from the founding Knowles family in 1998.

Potpourri’s executive management team, including president/CEO Jack Rosenfeld, will retain their positions with the $120 million-plus cataloger. Rosenfeld says that Potpourri’s new parent will enable the cataloger to continue to expand by acquisition, seeking companies that market to its core demographic group of middle- and upper-income women ages 40-65. In addition to its flagship Potpourri catalog, the company’s titles include Back in the Saddle, In the Company of Dogs, and The Pyramid Collection.

David J. Solomon, partner/managing director for Goldsmith Agio Helms, which advised Potpourri on the deal, confirms that Linsalata plans to use Potpourri as a platform for further acquisitions. “Private equity firms allow catalogs companies that started out as entrepreneurs to take the next step through the implementation of more sophisticated operations, such as computerized databases and better fulfillment,” he notes.

Internal growth too

But while acquisitions have added to Potpourri’s revenue and economies of scale, Rosenfeld is quick to explain that additional titles haven’t been responsible for all of the company’s revenue growth of late. Sales are up 10% from last year, he says, due to direct importing of merchandise from Asia and the addition of more proprietary products to the merchandise mix. For the fiscal year ending March 31, 2003, Rosenfeld is projecting 16% revenue growth.

Potpourri’s success is no doubt why HIG Capital decided to sell now, Solomon says. Private equity firms tend to hold onto investments for only a short time — typically three to seven years — and with Potpourri doing so well, HIG figured now was the best time to unload the business. After all, he says, “a healthy property fetches much more than a distressed business.”

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