The food-focused private equity firm Butterfly Equity is eating well this month, following the $1 billion closure of its sophomore fund.
The firm announced the fund closure on August 15, which nearly doubles contributions over its first funding round, brings the Beverly Hills-based Butterfly just shy of $4 billion in assets under management.
Launched in 2016 by Adam Waglay, a former KKR executive, and Dustin Beck, a former Vista Equity Partners and Riot Games executive, Butterfly invests in vital and innovative food companies spanning the entire value chain from “seed to fork,” according to the company’s statement.
Dean Kim, the head of equity research for the Playa Vista-based William O’Neil + Co., said that with rising inflation, chaotic fuel pricing, and other economic factors, it’s no surprise that funds heavily vested in the food sector are performing well.
“It’s interesting, there’s a lot of funding being raised for food-related investments. We’ve seen food prices go up already around 8% or 9%,” said Kim, noting that many experts are eyeing an increase of 2% to 3% over previous prices as the new normal. “I think that’s what this fund is gearing towards.”
In a statement emailed to the Business Journal on August 20 by a spokesperson, the company acknowledged that the macro environment of the current economy left few industries unscathed, “but fortunately for us many parts of the food value chain have shown a tremendous amount of resilience in spite of these headwinds.”
The company said its operational focus “combined with our companies’ strong competitive positioning has allowed us to weather the current economic downturn in stride and frankly emerge stronger through all of it.”
“The food industry has historically been underserved by private equity specialists who are dedicated to the space, with most deals in food being done by either broader private equity consumer teams or larger, generalist private equity firms looking to deploy capital opportunistically,” the company wrote in its statement.
Earlier this month, the company announced its acquisition of Mexican chain Qdoba, which it plans to merge with its existing brands to form a leading fast-casual restaurant platform in North America with nearly 800 restaurants.
Butterfly Equity entered into the definitive agreement with funds managed by Apollo Global Management to acquire Qdoba.
Other major Southern California deals for Butterfly recently include the company’s purchase last month of Evolution Fresh in Bakersfield from Starbucks and its partial sale of the Irvine-based Orgain to Nestle in February.
The company told the Business Journal that it’s also increased its Beverly Hills presence, with a major office expansion to accommodate its growing team. In the past two years, the team has doubled in size to meet the demands across its portfolio, currently employing around 35 people full- and part-time.
Waglay, co-founder and co-chief executive of Butterfly, said in a statement accompanying the fund closure that the recent support has exceeded even the firm’s more bullish expectations.
“Through these uncertain times, the food sector has emerged as one of the most important sectors for investing and we are humbled to be at the edge of this new frontier as a partner of choice working with such incredible food-industry leaders, innovators and disruptors to drive transformational change and growth where it matters the most,” Waglay said.