Two Recaps To 10.5x MOIC

Dan Chetrit was a traditional searcher, "stuck" in his first (well-performing) deal. That changed during COVID, when they successfully recapped the company. Rolling their carry back into the business gave them majority control, removed the full-time attention clause, and let them start building a portfolio instead of staying tied to a single company. Since then, they've added ~1 new platform per year while building a sourcing engine that aims at making them a top-decile independent sponsor.

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Last year they looked at roughly 750 deals. About 60% reached NDA stage. 15-20 turned into management meetings. 2-3 became LOIs. The team now includes a full-time BD lead, an investment associate, a recruiter, a fractional CFO, and an executive assistant. The goal isn't to maximize deal count, but rather to have sufficient deal flow to be selective and avoid "having to do" sub-optimal ones.

The initial B2C travel deal became the blueprint. Asset-light, negative working capital (yay!), strong repeat behavior. The business had attractive economics before Snowdon touched it, but their improving customer acquisition cost made it a rocket ship. They moved away from traditional marketing (newspaper and radio ads) toward measurable digital campaigns. Facebook worked especially well because the target demographic (upper middle class retired Quebecoises) actually spent time there. Once they realized they were reaching nearly half the Quebec market already, M&A became the obvious next step to expand.

The recap in 2020 reshaped the firm. Snowdon rolled 100% of its carry into the business while the lender provided roughly 3x EBITDA leverage. Some LPs took liquidity while others rolled equity forward. The carry rollover alone pushed the GP into a controlling position. In Canada, the structure also deferred taxes on crystallized carry. COVID followed a few weeks later, which was catastrophic for a travel business, but it forced them to innovate and achieve operational excellence.

A lot of Snowdon's value creation sounds pretty unremarkable on paper. Raise prices carefully, hire great people, etc. They've hired ~100 people across the portfolio over the last 3 years using an internal recruiter, so how about that for an ROI. Pricing gets the same attention. Small annual increases instead of huge jumps every few years. Dan's point was that most lower-middle-market businesses are far more operationally underbuilt than investors realize.

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