For a year, Jeanne Voigt sought an investor to help her bring her catalog business, MindWare, “to the next level.” She believes she finally found that person in 20-year industry veteran Martin Smith. In October, Smith purchased a “significant position” in MindWare, a New Brighton, MN-based manufacturer/marketer of educational toys.
A former vice president of marketing for women’s apparel catalog Newport News, Smith will assume the role of MindWare CEO. Voigt will remain president.
Founded in 1990 as a store, MindWare tested direct mail for a few years before launching a catalog — and closing the store — in 1996. During the past four years, MindWare’s sales have grown 25%-30% a year, to $15 million-$20 million; Smith plans to double that within five years.
Freeing Voigt to focus on developing more proprietary products, rather than on the day-to-day operations, is one way Smith hopes to grow the business. In addition to selling to parents and schools, MindWare has a fledgling wholesale business targeting art stores, museum stores, and retailers catering to teachers. The company has its eyes set on overseas expansion as well: In September it test-mailed 100,000 copies of the catalog in the U.K.
In examining MindWare’s business, “what appealed to me was that the catalog had a track record of several years of strong growth in the top line and good profitability in the bottom line,” Smith explains. “The customer file is growing quite strongly because the company has prospected quite aggressively.” MindWare has approximately 150,000 12-month buyers.
For her part, Voigt compares her search for outside investment to getting married: “We talked to a variety of people, and I had some personal criteria that weren’t just simply financial. We needed to be a good fit, and we wanted to find a real partner.”
Larry West, principal of New York-based investment bank West Cos., which advised Voight in the deal, believes that the MindWare transaction is emblematic of a trend in catalog industry mergers and acquisitions. Individual investors such as Smith as well as private equity shops are inquiring about the “next rung” of catalogers — those with revenue comparable to MindWare’s.
The MindWare deal proves that “it’s not only the bigger companies that can get investment,” West says. Smaller catalogers are also now generating more interest, thanks to investors and decent-size equity shops “that are willing to do minority and majority investments.”