PetSmart / BC Partners

In December 2014, BC Partners announced the acquisition of PetSmart Inc. for approximately $8.7 billion, or $83 per share. The deal closed in March 2015 and was the largest retail LBO since the financial crisis.

Why Pet Retail?

The pet industry was (and remains) one of the most attractive sectors in consumer retail:

• Recession-resistant spending: Pet owners consistently prioritize their animals' needs. Pet food and healthcare spending barely declined during the 2008-2009 recession
• Favorable demographics: The millennial generation was driving a cultural shift toward treating pets as family members, increasing per-pet spending
• Non-discretionary products: Over 60% of PetSmart's revenue came from consumables (food, treats) and services (grooming, daycare) that generate recurring demand
• E-commerce tailwind: Online pet product sales were growing 25-30% annually but were still only ~7% of total pet product sales, suggesting a long runway

PetSmart's Position

PetSmart was the largest specialty pet retailer in North America with approximately 1,450 stores. The company generated ~$7B in revenue and ~$960M in EBITDA. While the core brick-and-mortar business was mature, it threw off significant free cash flow, making it well-suited for a leveraged buyout.

BC Partners saw an opportunity to improve operations, expand services revenue, and build an e-commerce capability. The firm won a competitive auction, outbidding Apollo Global Management and other financial sponsors.