• Kingswood follows a playbook that emphasizes operational improvements for value creation
• Sponsor has a taste for complex carve-outs, special situations, working with atypical owners
• Sponsor is focused on Fund III deployment, fully invested first two vehicles

Since its inception in 2013, Kingswood has developed a turnaround playbook that sees it execute complex deals before deploying an operations-heavy approach to quickly create value.

This strategy was on display in the Los Angeles-based sponsor’s recent acquisition of Vitamin Shoppe, whose parent company, Franchise Group, filed for Chapter 11 protection in 2024. The bankruptcy was not a deterrent for Kingswood, which had been eyeing the nutritional supplement retailer for years, and saw an opportunity to turn it around.

“For a firm that prides itself on being creative problem solvers, as we do, dislocations present a lot of opportunity,” founding partner Alex Wolf told Mergermarket.

Kingswood focused on investments in business services, consumer, industrials, and distribution companies. Though it prides itself on its track record of executing complex turnarounds, the sponsor also invests in healthier businesses, often acquiring family or founder-run enterprises.

Kingswood, which as of today has around USD 2.7bn in assets under management (AUM), has raised three funds to date, completing 18 platform investments. The sponsor typically invests between USD 50m to USD 150m, targeting companies with at least USD 100m in revenue, though Wolf notes that these figures do not represent a binding range.  

The firm is currently deploying its third fund, which closed last year on USD 1.5bn. The fundraising took only 90 days to complete. The Vitamin Shoppe acquisition is the third platform investment from Fund III, Kingswood’s largest vehicle to date. The strategy to invest in a greater number of companies rather than pursue larger deals remains intact, however. Wolf anticipates that Fund III will make between 13 to 15 investments in total in the next three years.

Kingswood does have the capacity to pursue bigger deals, with some dedicated co-investment capital set aside for this purpose. The firm has offered co-invest since its first fund, but is seeing increased demand from LPs in Fund III, said Wolf.

“We have a broad range of opportunities because we intentionally try not to be too rigid in how we define the world in our opportunity set,” he added.

Bring in the operators

Kingswood’s roots as a middle market sponsor go back to Wolf’s earliest days in private equity.

Nearly three decades ago, he worked at Ares as one of the first employees hired by Antony Ressler, the asset manager’s co-founder and presently its executive chairman. Wolf later worked at Cerberus Capital Management, where he was the second professional hired within that sponsor’s nascent private equity group. It was at Cerberus that he developed an appreciation for middle market deals.

“I thought there was a real opportunity to launch a dedicated practice focusing on the mid-market where Cerberus had done some of their very best deals,” explained Wolf. “That was the big part of the genesis of the practice.”

To source opportunities for the complex turnarounds that it specializes in, Kingswood relies on a wide network of operating partners

The Vitamin Shoppe deal is a case in point. Before pursuing the opportunity, the team developed a deep understanding of the business through one of its operating partners, Alex Smith, who served as Vitamin Shoppe’s chairman between 2017 and 2019. During his tenure, Smith hired Sharon Leite, his former Head of Stores at Pier 1 Imports, to be CEO of Vitamin Shoppe. She served as CEO from 2018 to 2023.

After the Vitamin Shoppe deal closed, Smith took a seat on the company’s board while Leite resumed her former position as CEO, according to a press release. 

Looking ahead, add-ons are a key part of the growth plan for Vitamin Shoppe, and a central facet of Kingswood’s overall approach to value creation.

“There are great opportunities for growth through add-ons,” said Wolf. “We’re already seeing a range of those prospects for our newest acquisition, Vitamin Shoppe, and we’ve continued to scale our resources at the firm in order to support more activity.”

Diving into complexity

In a tougher environment for deployment overall, Kingswood has managed to maintain a robust pace, with both Fund I and Fund II fully invested, said Wolf.

The firm tends to shy away from buying assets from other sponsors, preferring to focus on three specific target groups: complex carve-outs, founder-led businesses, and assets held by “atypical” owners that may need a more suitable home.

Of these three profiles, carve-outs have been especially prominent. Six of Kingswood’s eight most recent deals fall into this category.

According to Mergermarket data, corporate divestiture deal volume in 1Q25 rose to its highest level since 2022. Notwithstanding tariff-related macroeconomic uncertainty, corporate carve-out activity is expected to pick up, as reported.

Wolf acknowledges that this trend would be positive for his firm. “That’s very good for us,” he said. “We have a strong history of working with corporates, and being able to deliver on what we say with speed and certainty.”

Two investments made last year showcase Kingswood’s approach to finding and getting complex carve-outs over the line. In April 2024, the sponsor acquired Kansas-based emulsifiers business PATCO Products from Amsterdam-headquartered Corbion. Prior to the acquisition closing, Kingswood worked with the Dutch company to untangle reams of supplier and customer contracts on top of other crossover functions.

Meanwhile, in August, the sponsor invested in information management company Kodak Alaris. Again, the deal was complex. It required Kingswood to come up with a solution that would enable it to buy the two parts of Kodak that had been owned by the United Kingdom Pension Protection Fund for over a decade – since the company had filed for bankruptcy in 2013. The latter deal also offers a good example of Kingswood’s strategy of doing deals with “atypical” owners.

Exit routes

Kingswood’s approach to exits starts with ensuring proper alignment exists from the get-go with the management teams of its portfolio companies, said Wolf.

“Particularly in both founder deals and carve-outs, this is their first opportunity for equity ownership and we find that creates great alignment and really keeps us all focused on rowing in the same direction,” he explained.

To date, the sponsor has completed two full exits through sale events. In December 2021, it sold contact center solutions provider Senture to Teleperformance, a France-based multinational. Kingswood had held the business for under a year, with the fast-tracked outcome showcasing how its operational playbook can quickly deliver returns.

Kingswood acquired Senture in January 2021, paying a multiple of 5.1x its EBITDA. It exited to Teleperformance at a multiple of 10.6x EBITDA, achieved an 8.3x MOIC (multiple on invested capital) and an around 900% IRR (internal rate of return).

It got there by executing a ten-month value creation plan that saw new leadership put in place, a tripling of the company’s salesforce, and a reduced reliance on federal contracts from 95% of revenue at the time of purchase to 60% by the time of Senture’s sale.

Three years later, Kingswood followed up with an exit from Save Mart, a California-based grocery chain with locations spread across the state and Nevada. Under its two years of ownership, Kingswood executed an operational improvement plan aimed at improving Save Mart’s merchandising, marketing and sourcing practices to improve efficiency. Kingswood exited last year to Jim Pattison Group, a Canadian conglomerate looking to expand its reach in the US.

“We were able to really marry up a big operational improvement story with a great outcome on a short timeline,” said Wolf.

On top of these exits, the sponsor has also had over 30 realization events where it has returned capital to its investors. While it has shown an ability to exit quickly, Kingswood would also be open to holding onto a portfolio company beyond the typical holding period if it saw a runway for further growth. To date, Kingswood has not utilized continuation vehicles, in part because the firm has had strong exit activity, but would remain open to the technology if the situation merited its use, said Wolf.