M&A: Piecing Together a Natural-Foods Empire

Deal guru Irwin Simon, founder and CEO of Hain Celestial, knows how to make mergers work.

SIMON 2Last April was a busy time at Hain Celestial Group. At its corporate headquarters on Long Island, not far from Manhattan, the organic and natural foods company was fast approaching its first $2 billion sales year. Irwin D. Simon–founder, chairman, CEO and president—was as usual perusing roll-up deals. At the moment, Simon was hot on the trail of an organic bakery called Rudi’s in Boulder, Colorado. Rudi’s was located near the Celestial Seasonings tea line he bought in 2000.

Later that month, Simon shook hands with the Charter Equity Partners deal team, paid the PE firm $61.3 million in cash and common stock and walked away owning an organic bakery. The bolt-on acquisition gave Hain Celestial about 60 new better-for you products, including wraps, pizza crusts, breads and bagels. Simon was happy to enter the fast-growing market for wholegrain, organic and gluten-free baked products without having to develop a product line from scratch.

In many ways, Rudi’s meets the classic Irwin Simon roll-up profile. Rudi’s has proven consumer appeal and enjoyed niche success, yet seemed stuck. Having been around since the early ’70s, the company’s products rang up on average barely $1 million a year. Growth seemed to have stalled. In announcing the deal, Simon disclosed plans to take Rudi’s “into new categories” through Hain’s wide-pipe distribution channels. He promised he’d bring Rudi’s into supermarkets, club channels and specialty stores around the world.

It was a smart bet he’d do just that. It was also a smart bet Simon would also do what he’d done dozens of times before: find ways to consolidate operations, possibly contract out manufacturing, and of course find those trademark synergies available through his global network reaching over 40 countries.

“Irwin is a great dealmaker,” says Mo Siegel, who helped create Celestial Seasonings herbal teas during the late-60s hippy heyday before selling to Simon. “He has put some good operators
underneath him. He is a really good communicator and is connected to a lot of people, knows what’s going on in the industry at all times. He follows his nose and sniffs out deals. I think in his sleep he dreams up deals.”

“Irwin is a great dealmaker. He’s a good communicator and is connected to a lot of people.”

That might be a stretch, but clearly scouting deals at industry forums and gatherings is one way Simon keeps his deal pipeline full. A major stop every year is the Expo West Natural Products trade show held in Anaheim in March. At shows like Expo West, the curly-haired, effusive Simon is the most recognizable figure in today’s natural and organic food sector, a walking exit plan for health-food company founders around the world.

“Irwin is very approachable,” says Siegel. “And he’s very fair. He strikes a reasonable deal. That reputation helps him get more deals.” While founders and key managers are often welcomed into the fold to oversee the post-deal integration, most do not stay on after the companies have blended.

In 2013, during a conversation at Simon’s headquarters in Lake Success, New York—he bought and moved into the sprawling structure built for the United Nations in the late 1940s—the acquisitive founder expounded on his approach to deal-making and his overall management philosophy. “At Hain Celestial, we’ve built out a strong infrastructure of sales, marketing and manufacturing,” he began. “My philosophy is that if we can find great companies that need these functions, and we can buy them and bring them into Hain, we can do better than if we started from scratch. All these acquired companies—their payables, their collections, their customer service, all their processes—can be run out of here. This makes for a lot of savings and enormous synergies. When these conditions are met, we are going to see a lot of growth.”


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