• Manager made first foray into IP ownership with 2023 Care Bears investment
• Eyeing deals in real estate licensing, pet products, wants to buy licensing agency
• Works on a deal-by-deal basis, raising capital from family offices, fund-of-funds

The Care Bears were among the most iconic children’s character franchises of the 1980s, thanks to an animated TV series that helped sell millions of toys worldwide. It speaks to the strength of their appeal that, four decades later, investors still see commercial value in the brand.

Recognizing the potential for long-term monetization via licensing streams on everything from Care Bears clothes to Care Bears books, IVEST Consumer Partners acquired intellectual property (IP) owner Cloudco Entertainment for USD 100m in 2023. Since then, the business has more than doubled in size, licensing products directly in the US and through partner agencies in global markets.

“It’s what we would call an evergreen property, meaning that it’s not dependent on any one movie or TV show,” Aston Loch, co-founding partner at IVEST, told Mergermarket.

This marked the 12-year-old firm’s first foray into IP ownership, but it was a logical extension for a consumer product licensing specialist with considerable operational expertise at all levels. Sitting at the top, George Jones, co-founder and chairman, previously led global licensing and consumer products at Warner Bros, served as CEO of Saks, and held a senior role at Target.

“It’s mostly made up of operators – people who’ve run companies, built businesses, grown sales teams, expanded distribution, and developed relationships in various international markets,” Loch added.

Focus and flexibility

CloudCo was IVEST’s seventh direct investment. Its licensing-focused portfolio also includes Paladone, a UK-based maker of licensed giftware, homeware, and lifestyle products, and Dan Dee International, a St Petersburg, Florida-based seasonal plush manufacturer. Altogether, IVEST’s portfolio companies generate around USD 1.5bn in annual retail sales across 50 countries.

The sweet spot is companies with USD 15m-USD 40m in EBITDA. IVEST prefers a deal-by-deal approach to fundraising, having found it facilitates greater focus on individual transactions and more flexibility in terms of holding periods.

“You have a group of investors in the direct industry that focus solely on how to find the absolute best companies to partner with and how to have the absolute best team to be the steward of that company,” Loch explained.

IVEST typically writes equity checks of USD 50m-100m per deal, with the ability to flex up to USD 150m. Investors are primarily family offices and fund-of-funds. In the case of CloudCo, participants included institutional investors and family offices, including Cloverlay and ShoreBridge Capital Partners, the latter in conjunction with family office investors.

Funding is already in place for a new Dubai-based, property marketing-related platform investment that will be IVEST’s real estate brand licensing debut. This is a growing area of the market that involves a renowned brand putting its name on a real estate development.

“We think in 5-10 years, doing a licensed brand for a real estate development will be the norm,” said Sam Bremner, a co-founder and managing partner at IVEST. “All over the world, developers are leveraging lifestyle brands for their buildings.”

Expansion plans

The real estate deal, which is expected to close soon, is one example of the firm’s broader expansion into new licensing segments. Other areas of interest include the pet industry, which is growing faster than the overall consumer market and where creative, sales-driven manufacturers are believed to offer rich potential for licensing.

“If you look at almost any category of consumer products, typically the growth rate is in the single digits,” added Bremner. “But licensing within those categories often grows at double the rate, sometimes more, so we specifically look for categories where licensing is becoming much more important to that category.”

A key part of the expansion strategy is a recently announced partnership with Licensing International, a trade association representing the USD 356bn brand licensing industry. Under the agreement, IVEST serves as the association’s exclusive strategic private equity partner, providing members with guidance and education.

IVEST also hopes to deepen its coverage by investing in a licensing agency. These agents act on behalf of licensors, usually in markets where the latter lack the requisite expertise or industry contacts to license products directly. It is a fragmented space, populated by specialists by category, geography, or retail access, presenting an opportunity for consolidation.

Loch views it as an opportunity to create a new core capability, supporting the firm’s ability to monetize brands across categories and geographies. “We see a big opportunity to roll up several of these agencies and create a more full-service licensing agency that can do more for brands,” he said.

Value added

IVEST sources deals through its own networks of operators and industry contacts or referrals from investment banks. For the latter, the goal is to be top of the list of specialist investors who understand licensing and the best routes to monetization. Value creation ultimately comes down to brand building.

“Licensing is simple,” said Loch. “Either you’re growing a brand as the licensed brand owner – like with Care Bears – or you’re leveraging a brand as a licensee.”

Oftentimes, IVEST helps founder-led businesses get to the next level, bringing in board executives it has worked with in the past and driving international expansion. The firm relies on its global relationships and expertise to support organic growth or pursue add-on acquisitions in other markets.

The 2021 investment in Paladone is a case in point. At the time of the acquisition, the company was primarily US and UK-focused, with only a small US presence. IVEST helped it scale in the US, partly through the acquisition of Point Pleasant, New Jersey-based WeCool Toys in 2023.

M&A is used to facilitate expansion into adjacent categories as well. Dan Dee’s acquisition of high-end industry peer Animal Adventure, for example, has resulted in a significant increase in the share of overall revenue attributed to licensing.

IVEST has made one exit to date, selling Mississauga, Ontario-based M&M Food Market, a frozen food retailer, to Parkland Corporation in 2021 for CAD 322m (USD 232m). The investment delivered a multiple of around 8x.

Much of the firm’s current focus is on new platform investments. IVEST aims to complete at least the two to three deals per year – including new platforms and add-ons.

“We’re growing our team and accelerating that pace,” added Loch.