Blackford Capital enters into hospitality deal

GRAND RAPIDS, MI—Blackford Capital’s acquisition of Snowhite Hospitality won’t be the private equity firm’s last investment in the hospitality space.

“Snowhite has been very successful over time,” said Martin Stein, founder and managing director of Blackford Capital. “It’s grown. There have, obviously, been ups and downs over the course of the company’s history—just like there have been within the industry—but it fit our general financial criteria. We also saw it as a business that was in a large space. [The industry’s] very fragmented, so there are few big players, but there are a lot of small players—very similar to Snowhite. We believe that Snowhite is a leader within the industry, and Dick’s [Snowhite founder Dick Kapadia] done a great job with that, but it’s also a very small part. We’re a fraction of a percentage of market share in this fair-sized industry.”

Prior to its acquisition of Snowhite Hospitality—a provider of design, procurement, and project management services—Blackford Capital had been in discussions with Kapadia for about a year. Kapadia still has an economic interest in the business and is involved in strategic and transition planning. The financial terms of the deal weren’t publicly disclosed. Debt financing was provided by West Suburban Bank.

This deal represents Blackford Capital’s first investment in the hospitality space. “This industry will continue to cycle, but on the whole, it is moving up a little bit faster than the general economy,” Stein said. For Blackford Capital, the acquisition has secured relationships with a variety of hospitality groups: Choice Hotels International, La Quinta Inn & Suites, InterContinental Hotels Group (IHG), Hilton and several others. Blackford Capital has also continued its search for additional acquisitions within hospitality.

Snowhite is Blackford Capital’s latest investment in its National Growth Practice, which invests in middle-market manufacturing, distribution and service companies in both mature and growing industries. This part of Blackford Capital’s portfolio is done on a per-transaction basis. “For us, and for the benefit of the company, it gives us a tremendous amount of flexibility,” he said. “It’s not like in four or five years we have to sell the business. If things are going well, we’re going to continue to stick with it and continue to get more upside.

Acquiring a family-owned business presents a private equity firm like Blackford Capital with some challenges. For example, the company is centered around financials and works with a lot of accountants to ensure reporting accuracy, a return on investment capital, etc. “That generally is in contrast with a family-owned business, and Snowhite is not the first company that has had this challenge, and it will not be the last,” he said. “Dick did extremely well, but [Snowhite] was accountable only to him. There was not a board of directors, senior lender, private equity sponsor or professional management team.” Depending on the acquired business, this transition can take anywhere from three months to two years, he said.

What’s similar between the two businesses is that both entities are Midwest companies (Snowhite operates out of Addison, IL) and both consider family values and workplace culture to be of the utmost importance. Additionally, all of Snowhite’s employees agreed to stay on post-transaction, “so we think that’s a good endorsement of us,” Stein said. “We try to ensure that the companies that we work with have similar environments and that they remain or become even better places to work.”

To lead Snowhite, Blackford Capital tapped industry veteran Greg Kadens in January. The opportunity for him is to build an “already successful company into a larger enterprise that will be an important and strategic supplier for our customers,” he said. He admitted to having conversations with Kapadia about joining the company back in 2012; however, at the time, they “could never quite put the whole package together.”

After parting ways with American Hotel Register Company in 2012, Kadens ran companies in several industries—including distribution of banking supplies and manufacturing high-end outdoor kitchen equipment. “When the opportunity to work with the outstanding team at Blackford Capital came along, I felt like it was the right time and the right opportunity to get back into hospitality,” Kadens explained.

What will stay the same: Snowhite’s history of providing “innovative, brand-right solutions at great values,” he said. “Dick Kapadia was a real innovator in the industry and we will continue to find ways to take care of our customers. We know that our hotel customers are successful when their guests are happy, and we have a continuous dialogue internally about what we can do…to exceed guests’ expectations,” he said.

“The FF&E business is more competitive today than I have ever seen it before,” Kadens continued. “There are a lot of good, hungry, innovative companies in the same space that Snowhite works in and that makes differentiating ourselves and maintaining customer loyalty a strong focus.” HB