Garden City Equity, an investor in founder- and family-owned businesses, recently raised $255 million for its latest fund, leveraging its people-first strategy to champion employee wellness.
Based in Charlotte, North Carolina, Garden City was founded in 2020 by Michael Arrieta, a former executive at Docusign. The firm targets lower mid-market businesses in the southern US with up to $25 million of EBITDA.
At the heart of the firm’s investment philosophy is a focus on employee wellness, something Garden City views as a key differentiator.
Michael Arrieta
“The first thing people want more than anything else is dignity and respect, a place of purpose and belonging; people want a place where they voice something. It’s actually being heard, and people want to know their upward mobility,” Arrieta told Buyouts, adding that the firm gives 10 percent of its profits back to the community or to philanthropy.
Garden City looks to provide employees with improved working conditions, such as dignified uniforms. It also looks to provide improved welfare for employees facing hardships, including emergency loans, food programs, emergency car replacements and childcare, among other incentives.
Garden City also prioritizes profit-sharing, a model which is different from Ownership Works’ employee ownership approach, increasingly being adopted by private equity firms to spread profits across employees at portfolio companies.
“The big difference is that we are not looking to sell these companies in three to four years,” Arrietta said. “In companies where we have profit-sharing, our model is very similar to the Ownership Works except that rather than waiting for a lump sum at the end when the business is sold, we do it on an annual cashflow basis.”
Buy-and-hold strategy
“We are a holding company, not a traditional fund,” the Garden City founder said. “We buy and hold instead of the traditional quick lifecycle of three to seven years, we have the ability to use minimal debt, we keep management teams in place, and we have all individual investors and families instead of institutional, pension funds or endowments.”
The latest fund was raised from about 200 investors. Among them are prominent athletes such as Drew Brees, Tim Tebow and Mark Ingram II; Horst Schulze, founder of The Ritz-Carlton; George B Huber, founding partner of Finback Investment Partners; Dude Perfect co-founder Tyler Toney; ex-Florida governor Jeb Bush; and Grammy-winning/nominated artists Thomas Rhett, Brandon Lake and Shay Mooney.
Investors need to buy into the firm’s people-first strategy, mission and investment thesis, Arrieta said.
“They have to be aligned to our mission and our three values of serving others, pursuing excellence and having relentless passion. If the investors are not looking for delivering superior returns while impacting people, then they are not for us. I have had many calls with people that don’t care about it, and I don’t care about them investing with our firm.”
The firm invests in B2B services, niche manufacturing and industrial services. Garden City barely participates in auction processes, instead focusing mostly on proprietary processes.
“We don’t have a mandate on selling these assets. The private equity way is that when they raise capital, their legal documents show the investment period and harvesting period,” Arrieta said. “I would be happy to flip a house like that because a house doesn’t have a soul. We don’t flip companies; they have souls.”
Investing in the South
So far, Garden City has invested in nine companies and exited two. With the latest offering, the firm is targeting between eight and 10 investments.
Drawing lessons from his intense travelling earlier in his career at Docusign, Arrieta said he prefers to invest closer to the firm’s Charlotte headquarters, so as to make it easier to visit portfolio companies more often.
“I told myself that when I launch my own firm, I want to buy companies that I can visit often and spend time at the companies and make it back to our families quickly,” he said, referencing his time when he used to take long flights for business.
Also, Arrieta said there are a lot of investment targets in the southern part of the country. “If you look at the demographics of the ageing baby boomers, there is a massive concentration across the southeast.”
Comments are closed.