This story is part CNBC Make It’s The Moment series, where highly successful people reveal the critical moment that changed the trajectory of their lives and careers, discussing what made them take the leap into the unknown.
The first time Daniel Lubetzky accepted a major investment for Kind Snacks, he made a huge mistake.
Today, Kind is a big name in the snacks industry, reportedly valued at $5 billion when acquired by food giant Mars in 2020. But in 2008, the company was much more small and the money – $16 million, from a private equity firm called VMG Partners – was hugely important to its ability to grow.
There was only one catch: the deal called for Lubetzky to sell the company within five years. At the time, he thought it was a good idea. But after four years, Lubetzky felt like he was still the best person for the job.
So he made a bet that saved him from losing control of his business and ultimately allowed him to become a multi-billion dollar brand, he says.
He bought his shares in the company from VMG.
It was expensive, risky and time-consuming. Lubetzky had to raise $220 million for the deal, a mix of company cash and millions of dollars in bank loans. Any drop in Kind’s revenue could have meant a default on that debt, which could permanently cost him his business.
Negotiations lasted two years, culminating in 2014. Kind’s annual sales nearly 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 to regain control of his business.
CNBC Make It: What were you thinking as the deadline to sell Kind approached? What made you decide to buy out the private equity firm?
Daniel Lubetzky: It’s like when you go rock climbing. Once you get to a peak you can see higher, then you have to climb another one, then you see an even higher one.
This is what happened to me. Four years into the deal, I realized Kind could get so much bigger.
My investors were pushing me to sell the business and were very impatient. My vision was to continue to grow the business for many years to come. And their vision was to go out and get a return on their investment.
So we ended up buying them. Now, because I hadn’t pre-negotiated the terms of their takeover, it turned out to be very, very expensive – and very risky. It was a very painful negotiation.
How confident were you that your bet would pay off?
I had a very strong feeling, informed by our momentum, that this was not the end – nor the beginning of the end – but the beginning of the beginning. And I wanted to continue.
But it was a scary moment. What if something goes wrong? Then, all of a sudden, you have so much debt, and you might even lose your business. I had sleepless nights. We probably had a loan of, like, $200 million.
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 I was doing it blindly. I would call that a very calculated risk, a very thoughtfully designed risk.
However, things could have gone wrong. I could have lost the business. But I believed in Kind.
What would you like to know at that time?
Above all, I would have liked to know that everything would be fine. There were many sleepless nights and a lot of tension until the plane landed.
I also wish I had known back in 2008 that when I’m dealing with a private equity firm, it’s not their way or the highway. Once you bring in investors, it’s no longer your business. You have to remember that this is now a business that you and others own.
At the same time, it’s your baby and you should try as much as possible to retain options for the future. Even if you think you know that in five years you’ll want to do something, keep your options open. You never know where you will actually be at that time.
Where do you think Kind would be today if you hadn’t redeemed control?
I think there’s a possibility, or maybe a probability, that if we had sold in 2013, Kind wouldn’t have achieved what it has achieved today. We would have lost ourselves in a big company.
When you sell a business to a bigger company, if your business isn’t big enough to stand on its own as a separate entity, the bigger companies can’t get away with it. They can really hurt the business they acquire. You see it all the time.
I am still a significant player in Kind today, and I still guide them. We have agreed with our Mars partners that Kind will be a separate standalone platform, and Kind continues to grow by double digits.
It’s not just about having achieved more financial success with this path. Kind may not 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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