Your first buyer is not your last: what selling in stages is actually worth

In August 2023 the consumer investor L Catterton agreed to take Thorne, a United States practitioner-grade supplement business, private in a deal valued at about US$680 million. Three years later, in August 2026, Procter & Gamble agreed to buy the same company for US$3.8 billion. Thorne did not become five times better in thirty-six months. It became buyable by a different kind of buyer.

That distinction is worth considerably more to a New Zealand owner than the headline is. Most founders here picture an exit as a single event with a single counterparty — the larger competitor, the domestic trade player, the fund in Auckland or Sydney. The Thorne sequence is a reminder that an exit can be two events, and that the first one is often what makes the second one possible.

Be honest about where the uplift came from. Not all of it was operational. The take-private was struck at a 94 per cent premium to a share price the public market had comprehensively lost interest in, which tells you the entry was cheap as well as the exit clever. A further part of the gain was a category re-rating: protein, lean-mass preservation and practitioner-channel credibility all became markedly more valuable between 2023 and 2026, helped along by the appetite-suppression drugs. Any fair reading gives the sponsor credit for buying well and for timing, not only for building. But the remainder is the interesting part, and it is the part an owner can actually copy.

What a financial buyer buys is not what a strategic buys. A sponsor is underwriting headroom. They are looking for a good business with obvious unfinished work — pricing left on the table, a channel that has never been properly resourced, reporting that cannot answer a simple question twice the same way, a founder doing four jobs at once. The distance between what the business is and what it could be is their return. A strategic acquirer is underwriting fit, and the test is far less forgiving: can the claims survive their regulatory team, can the supply chain survive their procurement standards, can the brand sit in front of their customers without embarrassment, and can the whole thing be absorbed without breaking something. Most owner-led businesses are ready for the first conversation years before they are ready for the second.

A financial buyer pays for what the business could become. A strategic pays for what it already is — and holds it to a much harder standard.

Which is precisely why the relay exists. The years in between are not a holding period. They are when someone else's capital and discipline pay for the work that turns a good brand into an institutional asset: audited numbers, a management team that is not the founder, substantiation files that stand up to a stranger's lawyer, a supply chain with second sources, systems that give the same answer twice. Founders are regularly told to do all of this themselves before going to market, and they should do as much of it as they can fund. But some of it genuinely requires capital and a board, and for a business turning over NZ$20 million the honest answer is often that a partner will pay for it faster than retained earnings will.

What this changes for a New Zealand owner. In a market this size the assumed buyer universe is short, and it is usually domestic. That assumption quietly sets the ceiling. If the eventual buyer for a natural health or skincare brand is a large offshore strategic — and increasingly it is — then the relevant question is not whether that buyer will pay a full price today, but what they would need to see before they would look at all. A first-stage sale is not a failure to find a strategic. In most cases the strategic was never going to look yet, and the sponsor is the party whose job it is to get the business to the standard where they will.

The cost, stated plainly. The relay is not free and it is not risk-free. You sell part of the business at the lower of the two valuations, take on a partner with governance rights and probably debt, acquire a reporting burden, and start running to somebody else's clock. If there is no second leg — the category cools, the fund runs out of time, the plan does not land — you are a minority holder in a company you used to control, with a shareholders' agreement deciding what happens next. Selling in stages works when both stages were planned. It is punishing when only the first one was.

How to choose a first buyer with the second one in mind. The questions that matter are answerable before you sign. Has this investor actually sold businesses to strategic acquirers in your category, or only bought them? Where are they in their fund's life, because a fund with three years to run will race a business in a way a fund with eight will not. Can they name the eventual buyer universe, specifically, and do they have relationships in it? What are the rollover terms — how much do you keep, at what price, with what security? Who decides when the second sale happens, who can force it, and is your consent worth anything if you disagree? Drag-along and tag-along rights, timing control and the definition of an exit are not boilerplate. They determine whether the second sale pays you or merely happens around you.

Why we take this view. We spend our time between founders and the people who eventually want to buy them, in categories — natural health, botanical ingredients, skincare, science-led consumer products — where the highest bidder is frequently a large offshore group that will not engage with a business until it meets a standard most owner-led companies have never been asked to meet. The useful question is rarely “should I sell?” It is “who is the right buyer for this business as it stands today, and what would that buyer need in order to hand it on to the next one?”

If the only exit you have considered is a single sale to a single buyer, it is worth testing what a staged one would be worth to you — and what it would cost. You can also have these notes sent to you by email.