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Snapped Up.

Byline: Joe Harwood The Register-Guard

A private equity fund, led by an ex-investment banker and a former manager for a Raytheon Co. division in Antarctica, is the new owner of Eugene-based jewelry maker Jody Coyote.

Making low-cost earrings for sale in department stores and independent retail outlets clearly isn't as sexy as negotiating complex mergers and acquisitions or moving people and cargo in and out of the South Pole.

Yet Peter Day and Chris Cunning like the idea of running their own 70-employee company.

"I didn't want to be an investment banker forever," Day said. Nor did Cunning want to toil in the employ of others for the bulk of his working life.

So the two college buddies hatched a plan five years ago that eventually led them to Jody Coyote, a 30-year-old Eugene firm that has had some financial ups and downs, including teetering on the edge of bankruptcy just five years ago.

It was in 1998 while working at the South Pole that Cunning received an e-mail from Day.

Then an investment banker in Seattle, Day had an idea to launch a private equity fund that would raise cash from investors, and search for and buy an undervalued manufacturing or distribution company with growth potential.

Day and Cunning would put up some money and run the acquired firm, and the fund's investors would receive shares in the venture.

With the concept clear, the two continued their full-time jobs for a few years, then headed back to college to earn advanced business degrees. Packing freshly minted MBAs, they last year set up the fund, Leader Creek Partners, and started raising money.

"We felt we could either go the traditional route and do consulting work and sock away money, then when we're 45 strike out on our own," Cunning said. "Or we ... could find a group of investors and then find a company."

Day worked his Rolodex, making the pitch to contacts from his days in investment banking. Cunning searched the Northwest for acquisition targets.

Cunning and Day, ages 30 and 29, respectively, said they screened more than 100 companies, visited about a dozen and seriously considered seven or eight.

Jody Coyote's name came up in January. Gene Wolfson, founder and majority owner of the earring and fashion pin maker, had put the venture up for sale. Revenue growth for each of the past three years exceeded 30 percent, and profit levels were attractive, Cunning and Day said.

They came to Eugene in March, met with Wolfson, and signed a letter of intent in April. Then Day and Cunning went on the road with Jody Coyote sales reps to learn the business and conduct a street-level examination of the firm.

The deal closed Oct. 1. Day and Cunning are the co-owners, and the Leader Creek investors - all experienced business executives - make up the company's board of directors.

"We went out and found the money first, then we went out and found a business," Day said. "Most people find a business and then start looking for money."

They said they plan to keep all of the employees and the 18,000-square-foot west Eugene manufacturing and office building that the company leases.

"It took five years, but now we are doing it," Cunning said. "It was a calculated risk, and to date, it has worked."

Cunning, Day and Wolfson declined to divulge the sales price or terms. But Wolfson last year told The Register-Guard he wanted to sell the firm for the equivalent of 12 months trailing sales. Jody Coyote's sales for the fiscal year ended June 30 were about $4.1 million, Cunning said.

A brand following

Day and Cunning said they like Jody Coyote's potential for growth, its cutting-edge marketing and its established retail following.

"There are opportunities beating down this company's door," Day said.

"We have a brand following that is amazing for a company the size of Jody Coyote," he added. "We have a great, well-designed product line, and retailers and customers love the product."

Jody Coyote earrings and fashion pins sell in the $5 to $30 range, and average about $15. They're sold in about 1,600 independent retail stores and through a handful of large retail chains such as The Bon and Gottschalks. The Eugene-based Troutman's Emporium chain, which went bankrupt and closed earlier this year, was a big client.

Day and Cunning said they hope to boost sales and the number of accounts, but declined to disclose specific strategies. Cunning said one obvious step is to approach retailers that traditionally don't carry jewelry, but have customers who would buy Jody Coyote jewelry.

A marketing plan Wolfson launched in early 2000 continues to attract new customers, Day and Cunning said. Under that plan, the company sets up an account with a retailer and agrees to buy back any inventory unsold after 90 days. At the end of that three-month period, the retailer receives fresh items, returns unsold items from the previous shipment, and receives credit for the unsold inventory.

Retailers favor the arrangement because it is virtually risk-free. Jody Coyote sells the returned inventory at factory outlet stores or saves seasonal earring designs for later shipments, Cunning said.

Since the plan's introduction, sales have risen. Sales hit about $2.3 million in fiscal 2001, $3.2 million in fiscal 2002, and $4.1 million in fiscal 2003, the company said.

Day and Cunning said they have good credit lines to finance growth. Sales will govern whether the company ramps up production and hires more employees, they said.

Third sale

The sale is a relief to Wolfson and employees.

In 1990, following an unsuccessful attempt to sell the company in 1984, Wolfson sold the firm to employees via an employee stock ownership plan. Under the deal, Wolfson was to receive payments from Jody Coyote over a period of years.

But in the mid-90s, when the company hit financial turbulence and missed a payment to Wolfson, he took back an ownership stake. In 1998, at the behest of some long-time employee stockholders worried that the ailing firm would fold, Wolfson returned and eventually took a majority ownership stake.

After stabilizing the company, he put it on the market last year. Wolfson said he wanted any buyer to keep the company in Eugene. And he wanted the sale to succeed.

"I think Gene screened us as much as we were screening him," Day said.

"I'm very happy with the outcome," Wolfson said. "Everybody was made whole, and they are keeping it in Eugene."

Wolfson, along with other managers, will stay on with the company. Wolfson said he'll probably stick around for three years and work on new products while Cunning and Day handle the business end.

"They are bringing a lot of business skills to the organization," Wolfson said. "These guys have good business mechanics."

Employees appear to be taking the acquisition in stride. Shawn Fontain, the company's product development manager, said she is thrilled. "The idea they want to grow the company is good," said Fontain, who has been at Jody Coyote for 20 years. "I want be able to work here until I retire."


Business: Private Washington-based investment partnership created to buy and expand small manufacturers or distributors.

Principals: Peter Day, Chris Cunning

Investors: Day, Cunning and 14 partners have contributed to the firm's business search and acquisition fund. Partners include:

Steve Altmayer, CEO of Yakima, Wash.-based Wrap Pack Inc., a maker of treated fruit and vegetable wraps;

Terry Greve, a former principal of Wallner & Co., a California-based private equity firm;

Stuart Platt, a retired rear admiral who joined Diagnostic Retrival System, a defense electronics firm, after leaving the Navy;

Kinny Johnson, a founding partner in Colorado-based Sequel Partners, a venture capital firm specializing in tech start-ups;

Bill Greenwood, a founding partner in Windswept Capital LLC, a Seattle-based merger and acquisition firm.


Eugene-based jewelry maker Jody Coyote makes low-cost earrings for sale in department stores and independent retail outlets. New owners Jody Coyote, Peter Day (left) and Chris Cunning created a private investment partnership to buy the Eugene manufacturer.
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Title Annotation:Entrepreneurial partners raise cash to buy a Eugene company with growth potential; Business
Publication:The Register-Guard (Eugene, OR)
Date:Oct 19, 2003
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