Sierra Capital Partners
2010 | Case No. E358
After earning their MBAs from Stanford Graduate School of Business in 2008, Tessa Marks and Jason Church started a search fund, Sierra Capital Partners (SCP), with the goal of purchasing and running a company together. Marks, who had been a management consultant with McKinsey & Company for three years, and Church, who had been a product manager for Nike, brought complementary skill sets to the table. They were excited about getting into an operating role and building a business. They shared a strong work ethic and also had a similar set of professional values. Beyond their own productive partnership, they were also pleased that SCP had the firm backing of their investors, and felt confident that they could secure the equity needed for the right opportunity. After 20 months of hard work and few prospects, Marks and Church suddenly found themselves actively evaluating the three best acquisition opportunities they had seen since the inception of their fund: • Pocket Book Toys (PB), a direct sales company offering high-quality educational toys for babies, toddlers and young children • Great Greens (GG), an eco-friendly start up that manufactured and distributed “green” fertilizer for home gardeners • American Veterinary Company (AVC), a branded chain of 15 small veterinary hospitals in Los Angeles, CA Marks and Church only had about 5 months of runway left in their search fund. Although very different, each of the options was viable, and each seller was qualified. The pair debated how to best ensure a positive outcome. In particular, they wondered whether they should put all of their energy and focus into one opportunity, or run parallel processes. They also wondered if they should attempt to raise additional search capital to take off some of the pressure. After speaking with their investors, Marks and Church believed raising additional capital was possible, although it would be expensive (e.g. a 100 percent step up), and distracting to their efforts of conducting due diligence and negotiations on a deal.
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