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Advantage Rides SPAC To Public Markets

Advantage Solutions Inc. is moving closer to its long-awaited plans to go public, with last week’s announcement of a reverse merger deal with a blank-check firm that gives the Irvine sales and marketing firm an equity value of $3.3 billion.

The deal to combine with Naples, Fla.-based Conyers Park II Acquisition Corp., and subsequent move to the public markets should place Advantage among the top dozen or so spots among OC’s largest public companies by market value.

The food- and retail-focused marketing behemoth has more than 3,500 clients, including Amazon, Walmart, Target, Kroger, PepsiCo, Bayer and AT&T.

That’s supported by more than 58,000 employees backed by more than 400 data analytics experts funneling the insights used to inform brand strategies, sales plans, merchandising, e-commerce and other services Advantage bills its customers for.

“Advantage is a terrific business and we believe it is a terrific value,” said Jim Kilts, executive chair of Conyers Park II, in a conference call last week.

Kilts is the former vice chairman of Procter & Gamble, and CEO of Gillette and Nabisco, and ran Kraft Foods. He’ll remain chairman of the combined company.

“I’ve been on the board of the company since 2014 and have essentially done six years of due diligence … [Advantage] is the clear leader in the space with the number one share in key business units, unmatched scale and capabilities and proprietary technology tools,” he said.

Factoring in $1.9 billion in debt post-merger, Advantage is expected to have a $5.2 billion enterprise value. Its estimated 2021 earnings before interest, taxes, depreciation and amortization are expected to be $515 million, according to regulatory filings.

The company’s current private equity owners—Bain Capital Private Equity, Green Equity Investors VI and CVC Fund VI—are set to roll their shares into the business, taking a 62% stake and pumping another $200 million into Advantage.

The additional equity is part of a $700 million private placement, which includes Conyers Park among other investors. Some $2.9 billion in existing debt held by Advantage will be retired as a result of the reverse merger and associated financing deals.

Conyers raised about $450 million in its IPO in late 2019.

The merger is expected to close as early as late October; Advantage will remain based in Irvine.

SPAC Attack

Advantage, with news of the deal, pulled its initial public offering paperwork last Wednesday, concluding an original run beginning in 2017 to go public through a traditional IPO.

Its use of a special purpose acquisition company or SPAC, a cash-flush blank-check company, is a mechanism that has seen plenty of action of late, although the concept first took root in the early 2000s.

SPACs generally allows for a speedier and less expensive process for private companies to go public than a traditional IPO. Investors in SPACs are largely betting on the ability of the blank-check firm’s management team to identify a good merger candidate at the right price.

The Advantage reverse merger comes on the heels of a similar plan for Newport Beach homebuilder Landsea Homes, part of China-based real estate firm Landsea Group (see the Sept. 7 print edition of the Business Journal for more details).

The homebuilder is set to go public after being bought by a New York-based SPAC in a deal that gives it an enterprise value in excess of $600 million.

Irvine-based Allied Esports Entertainment Inc. (NYSE: AESE) was the most recent local company to go public through a similar reverse merger, via last year’s deal with Minneapolis-based Black Ridge Acquisition Corp.

A SPAC is also said to be a consideration for Irvine-based luxury automaker Karma Automotive.

Growth Plan

Advantage’s deal is seen as a way to continue the furious rate at which it has bought other companies, while easing its debt load.

Part of the 30-year-old business’ strategy of late is to dominate the market through acquisitions. There have been 60 since 2014, and M&A is to remain a key part of the growth moving forward.

The deals have allowed the company greater geographic reach and expertise that has helped build what Advantage CEO Tanya Domier called a “moat” around the business, as it performs much of the back-end functions few hardly think about or notice when buying everyday items in stores or online.

“We’ve used the combination of a build-and-buy strategy to amass new capabilities to deliver solutions for trends like emerging brands, e-commerce, and private label,” said Domier, who joined the company in 1990 and took over the CEO role in 2013.

Scale

Advantage’s Cincinnati office, as an example of the company’s reach, is focused on grocer Kroger—also based in the city—with 200 salespeople working on behalf of the retailer. So in the case of an item like laundry detergent, Advantage’s staff map out annual plans that dictate promotions, where an item goes on a store shelf, building in-store displays, ensuring the right prices come up when a bar code is scanned and more, all with the goal of making sure a particular product sells—and that’s replicated at store after store both in brick-and-mortar locations and online.

“We evolve one step ahead of our clients’ needs,” said Domier during a conference call last week.

Domier, who was unavailable to comment for this story, will remain in her position once the deal closes.

When she first joined, there were 50 people at the company.

Advantage this year is expected to close in on $475 million in adjusted EBITDA on $3.2 billion in revenue.

Said Kilts: “Advantage has a business model that has time and time again proven itself to be resilient.

“Whether it was the 2008 recession, the restructuring of retail coverage or most recently the COVID-19 pandemic, Advantage has been able to successfully transform every challenge thrown its way into an opportunity and come out on top.”

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