Deal Mechanic: Navis & TrimCo

TrimCo in 2005 was a small Hong Kong-based supplier of care-and-content labels to apparel brands that manufactured in Southern China. It was a 30-year-old, family-owned shop that had reached a plateau – just the kind of business that appeals to Navis Capital Partners, a small-cap buyout firm based in Malaysia.

TrimCo was well-run by the founder, explains Bruno Seghin, senior partner at Navis. Cash flow was steady, but revenue growth and margins were little more than flat despite the surge of garment manufacturers setting up in China.

In 2005, Navis bought a majority stake in TrimCo for an equity cost of $11.1 million. During a seven-year holding period, top-line revenue grew 3.1x and EBITDA grew 3.3x. The firm divested TrimCo in 2012 in a sale to Partners Group, reporting a 10x exit. 

The exit result came in part from buying well, Seghin says. But the critical ingredient was the relationship between TrimCo’s founder and Navis. 

“Some founders say they agree with you, but inside they do not agree,” Seghin says. “But with TrimCo it worked perfectly. She saw we could help the business. We could find people, make acquisitions, talk to banks, things she didn’t do before.”

He believes the key to operational change is the receptivity of the entrepreneur. “We could give the best of ourselves because we felt that what we were doing was being recognised and we could add value. Then it becomes a virtuous circle.”

So what value did Navis add, exactly?