Hoffmann co-CEO on the art of buying 10 business in 8 months

The M&A machine at the Hoffmann Family of Cos. has been running full-blast, with at least 10 acquisitions in the first eight months of 2024. 

The family-run conglomerate now has more than 100 global brands and employs 11,000 people with businesses in 30 countries and 400 locations worldwide. That includes 40 business in Southwest Florida with at least 2,000 employees, entities such as Hertz Arena, Naples Princess Cruises and The Old Collier Golf Club. Its founder and chairman, David Hoffmann, lives in Naples with his wife, Jerri Hoffmann. The couple, since moving to town in 2016, have become prominent philanthropists, with causes from the Boys and Girls Club of Collier County to Everglades Foundation, and, according to previous interviews, have invested some $500 million into Southwest Florida businesses and properties. Known as HF Companies, the business maintains an office on Fifth Avenue South in Naples. 

In 2022 Hoffmann named his two sons, Geoff and Greg, co-CEOs. Geoff lives in the Chicago area, where the company recently bought a dairy and ice cream business out of bankruptcy. Greg lives in the St. Louis area; David Hoffmann was born in Missouri, and the company has a large portfolio of businesses in the Show Me State.

In talking about the company’s M&A strategy, Geoff Hoffmann is straightforward and methodical. The company, for the most part, sticks to basics like knowing and understanding the product or service and getting to know the management team. And while he celebrates the wins, Hoffmann is a bit more animated in talking about the ones that got away — and lessons learned from those setbacks. 

Hoffmann cites, for example, a potential deal that collapsed over the past year for an unnamed manufacturing business, one he says makes “something most people use on a weekly basis at their homes.” 

“We were really stretched as a team, and we couldn't make the management presentations in person,” Hoffmann says. “And I think it led to the sellers feeling like we had a lack of interest in their company, which actually wasn't true. That was kind of an inflection point for us to be like, OK, we are serious about our investment philosophy and we need to make sure we've got the support so that we can get on the airplane and go see people. Because even though we're in this virtual world, nothing replaces shaking somebody's hand across the table. And you can only pick up so much culture and nuance from a Zoom. And so getting on a plane is meaningful to people. It means that you are investing in this relationship.”

In a recent interview with the Business Observer, Hoffmann talked about that near-deal, the company’s M&A strategy and more. Edited excerpts: 

HF Companies was buying business before you and your brother became co-CEOs in 2022. What changed in the strategy to lead to the current rapid acquisition rate? 

I certainly think we've ramped up our activity. Some of the acquisitions that we made when we were first starting out were probably smaller in scale and received less kind of public mention. But we've changed the median size of (the) businesses that we're bringing in. The companies usually have a little bit larger brand presence and get some more media attention and coverage. We have invested pretty aggressively in our M&A apparatus. We have a team of 10 professionals that focus on M&A and then also company integration once they get here. These are really, really talented individuals, some of the best and brightest minds that I've been around, and just a super, super talented team. Our deal flow, even still, we probably could use several additional team members to take advantage of just all the things that come across our desk. 

Has the past 12-18 months of notoriety from doing deals led to more companies and bankers looking to HF Companies as a buyer? 

It's one of those things where, as you get bigger, as you get more well known, you just naturally get more and more deals coming across the desk. And I think banks and companies enjoy working with us because we're pretty straightforward in our negotiations. And once we get to the stage of letter of intent, we're going to close. It's very, very rare, I mean, I could count on a hand less than five fingers the number of deals where we had an LOI in place where ultimately we did not close on the transaction. And so I think that reputation follows you in the marketplace, that you have (a certainty) of closing. And we don't always get to LOI. Make no mistake, we turn down or pass on a number of opportunities, but once we do get there, we're going to bring that business into the HFC home. 

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What are some must-haves the M&A team looks for in assessing a potential acquisition? 

Even though we compete with private equity, we really are family equity and we look for businesses that have a super-strong culture, that take great care of their employees and have great feedback from their employee teams about the management team, that have stability in earnings and that have reasonable growth rates moving forward and that are built on a heritage of success.

What stands out to you personally when assessing a potential acquisition? 

I do think it's critical that all businesses have a pathway to growth. You know, even though we're not trying to take over the world, growth just creates an environment of excitement. It creates opportunities for team members and employees, for career advancement and career development. It creates opportunities in the marketplace. And I think what we found in businesses that have stagnated or maybe even kind of started to give back a little bit, it's a dangerous place to be in, and so we always want to be growing. And not every business, obviously, is going to grow every single year. There's step growth. To get to Mount Everest, you climb up, and you have to go back down to base camp 1, then you climb up, base camp 2, you go back down. So it's methodical. Growth is critical to the underlying foundation of any business but especially those that we invest in. 

What does HF Companies look for in size of potential acquisitions?

It doesn't matter if you're buying a company that has $1 million in earnings or $25 million, the process on our end, it takes the same amount of time. But if we were going to build an investment thesis around a business, probably $6 million of EBITDA (Earnings Before Investment Taxes, Depreciation and Amortization) and above. But that's not to say we won't transact at companies smaller than that. In fact, a lot of times we do, but it's in a bolt-on capacity to core investments we already have. So we'll still do a number of deals that have $1 million or $1.5 million EBITDA if they're complimentary to a company already in our portfolio.

How do you assess if the culture of a potential acquisition is a fit? 

You can see a P&L, you can read a balance sheet, you can understand kind of how the business is performing, but really the art of what we're doing is making sure the team aligns with the values that we have as an organization. And so it's through direct conversation. It's through industry reputation. It's through banking relationships, lawyer, legal relationships. Once you get in the diligence process, there's a variety of different stakeholders involved that, once you've been at this for a while, you can kind of pick up on nuances they might articulate based on their experience with the company, and kind of figure it out. And then, when you walk a floor you can kind of see people who are working, and do they have smiles on their faces? Are they talking to each other? Is there an excitement in the break room? Is it a place that has energy or is it more kind of stale? Are people clocking in, clocking out and kind of looking around their shoulder, like, ‘when is work over,’ that sort of thing. It certainly is an art.

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What are some investment return benchmarks the company looks for in assessing acquisitions? 

We are typically looking to hit singles and doubles. We're not looking to invest some capital and all of a sudden triple it or quadruple it in the next six months. So if it's something that's relatively unproven or a product or service or technology we're not comfortable with or don't understand, we would take a pass on it. If there were any trust issues, I think, in terms of working with the management team or numbers or data provided, or bad relationships with vendors or customers based on lack of ethics, lack of ethical practices, those would be non-starters for us, just close the door and not move forward.

There are some similarities in the kinds of businesses HF Companies buys and the ones Berkshire Hathaway buys — not in size, but in terms of the Warren Buffett model of buying what he understands and what he thinks people will always need, like soft drinks, waste management, transportation etc. Is that by design?

Obviously somebody we greatly admire is Warren Buffett, Berkshire Hathaway. I wouldn't say we necessarily model them, because they are in a completely different place in the market than we are. We're not even anywhere near that discussion. But I think we both have a philosophy of investing in businesses with cash flow you can understand, with a portfolio of diversified businesses that isn't going to be overextended no matter what economic conditions are confronted. We have businesses that are cyclical in nature. We have businesses that are counter-cyclical. So that no matter what, we're able to kind of keep hitting that single and double, and that's where I think if you're hitting a Grand Slam, typically, you're going along in a particular industry, or within a particular niche in an industry, and kind of betting the ranch. And that's really not what we do, because as that family equity we're not sellers. We have sold one business in our history, and we look to invest in businesses and put a plan of sustainability in place so that businesses will have a pathway to success over the next five, 10, 15, 20, 50, 100 years. So we've got to believe in the industry that they serve. We've got to believe in the management team, believe in the investments they're making, that they can fulfill that promise.