Promotional products companies are continuing to prove attractive to private equity pros.

The latest example comes with the Aug. 3 announcement that Chicago-based PE firm Monroe Street Partners (MSP) has acquired a majority stake in Brandito (asi/325944), a Richmond, VA-headquartered distributorship founded in 2009 that has appeared on Counselor’s Best Places to Work in promo list and the Inc. 5000 rankings of the fastest-growing private companies in the United States.

Michael Lovern, Brandito

Financial terms of the deal were not released. Executives stated that Monroe Street undertook the investment in partnership with Brandito founder Michael Lovern, who is continuing as company president and who made what was described as a “substantial reinvestment” in the distributorship. Lovern holds a “material ownership stake,” the company said.

“We have received considerable interest from potential buyers over the years, but something felt different when we met MSP,” Lovern shared in a LinkedIn post. “Their managing partners, Kenneth Mill and Alex Foshager, share in the vision and values of Brandito and feel just as strongly about our path forward. We knew that MSP’s strategic guidance, deep operating resources, and equity capital will allow Brandito to create substantial value for what we value the most – our customers and employees.”

In Brandito, MSP saw a company with a talent, focus, culture and operational aptitude that sets it up for substantial growth.

“Brandito’s management team has built a comprehensive platform of interconnected promotional product services perfectly suited to servicing large corporate clients,” said Mill. “We are excited to help the company capitalize on its leading position in a fragmented market.”

Backed by private equity, acquisitions may be part of the firm’s future growth strategy.

“We look forward to partnering with Michael and the rest of the Brandito team to support the company’s key organic and inorganic growth initiatives,” Foshager said.

Mill and Foshager founded MSP in 2022 after having worked in the investment banking division of Goldman Sachs. They said that MSP is working to build a portfolio of family and founder-run companies across the business services and industrial sectors. “MSP’s objective is to partner with experienced operators to acquire, grow and improve businesses in the lower-middle market,” a company bio stated.

Beyond Brandito, MSP has one other company in its portfolio so far – Vigilnet, which operates in the criminal justice field providing electronic monitoring services/products.

Private Equity’s Growing Presence

There’s been an increasing flow of private equity money into the promotional products industry over approximately the last decade. Investors are attracted, in significant part, by the fact that promo remains a largely fragmented industry in which there’s ample potential to scale given its nearly $26 billion size – a market expected only to grow in the long term as branded merchandise becomes ever more pervasive.

Three of the top five distributors on Counselor’s most recent Top 40 list have private equity investors – HALO Branded Solutions (asi/356000), Staples Promotional Products (asi/120601) and Custom Ink (asi/173232). Similarly, three of the top five suppliers on Counselor’s supplier Top 40 list also have PE backing – S&S Activewear (asi/84358), alphabroder (asi/34063) and PCNA (asi/66887).

There was a flurry of #acquisitions in the #promoproducts industry in 2022 and the first couple weeks of 2023. What's driving all the deals? Will they continue? https://t.co/1FNsrxMGrD @asicentral @Tim_Andrews_ASI @ASI_MBell

— Chris Ruvo (@ChrisR_ASI) January 17, 2023

The PE investment isn’t limited to just suppliers and distributors. Private equity money helps propel certain industry service providers too.

In late July, for instance, it was announced that Frontier Growth, a private equity firm based in Charlotte, NC, had invested in Toronto-headquartered commonsku, which provides software solutions specifically built for the promotional products industry. (Founders Catherine and Mark Graham retained majority ownership.) Elsewhere, private equity firms PSG and Blue Star Innovation Partners are invested in Inktavo, a company that provides cloud-based software to apparel decorators.

Industry executives believe the influx of private equity money is one (but certainly not the only) factor fueling a rise in merger and acquisition activity in the promo space. In recent years, private equity spending power has helped catalyze some of the biggest acquisitions the industry has ever seen, such as PE-backed Top 40 supplier HPG (asi/61966) buying what was then another Top 40 firm, Evans Manufacturing (asi/52840), earlier in 2023.