Ex-Goya COO on the $1.4 Trillion Family Business Opportunity in Three Consumer Sectors | Andy Unanue

**Andy Unanue** (0:00)
Our economy is driven by family-run businesses. 70 plus percent of the GDP is generated through family-run businesses. In the food, beverage, pet, wellness sector, it's a $1.3, $1.4 trillion market opportunity. So it's a big market. I'm a family business guy, I love businesses and I love families.
And every time we've sold a business, those families have become investors in our next fund.

**Jack Farley** (0:28)
Welcome to Other People's Money. I'm your host, Max Weethe, and I'm joined today by Andy Unanue, founder and managing partner at AUA Private Equity Partners, which focuses on lower middle market, family-run businesses, and specifically on making operational improvements in their portfolio companies. Andy, thank you very much for coming on the show.

**Andy Unanue** (0:48)
Thanks for having me, Max. Excited for the conversation.

**Jack Farley** (0:51)
Well, it's really hard to separate what you're doing now from your experience in your own family business. So for many years prior to starting AUA, you were the COO of Goya Foods. I'm sure many people know Goya Foods. It's one of the most successful Hispanic-owned food companies in the US.
Talk to me a little bit about your experience there and how it was really the genesis behind the strategy at AUA.

**Andy Unanue** (1:16)
Look, I grew up in a family that had a family-run business. So a lot of kids like me, you know, we worked every summer and holiday since I was in seventh grade, getting to know the business, getting to know the people in the in the organization. It was nice to spend time with my family on not just a social level, but a work level.
And really seeing what my father was driving and later my brother and uncle. And but it was a great experience. You know, it drove home what hard work is it does for a company, what treating people with respect, you know, understanding that, you know, putting out consistent top quality product is a way to succeed, you know, having strong family culture or strong corporate culture, whatever that culture is, is important to moving forward. And I love working with families. So, you know, while I was at Goya, I did a lot of, you know, continuing education and research in family businesses.
And that's what led me to starting the firm after I launched the family office in 2004 and institutionalized that. I realized that I really liked working with families. I love that culture and wanted to help other families, you know, transition out of the business if that's what they desired. So, it was kind of really the genesis of what we decided to do at AUA Private Equity.

**Jack Farley** (2:47)
Yeah. Well, family businesses in many ways, that is the origin of industry here in the United States. Obviously, we've seen so much corporatization and the growth of companies to some of the mega corporations that we have today, but smaller family-owned businesses have also gotten very large. What is the market size like? And help me understand, you know, what percentage of the US economy still operates in a family-owned business?

**Andy Unanue** (3:14)
Our economy is driven by family-run businesses.
I know in the value chain that we invest in, so that's family-owned businesses in the food, beverage, pet, wellness sector, it's a $1.3, $1.4 trillion market opportunity. So it's a big market. But obviously, the entire family business community is much larger than that. And again, I think 70-plus percent of the GDP is generated through family-run businesses. I'm not 100% sure, but I think it's something like that.

**Jack Farley** (3:52)
So your specific segment, $1.3 trillion in, you said, it's food, pet, wellness, what was the other one?

**Andy Unanue** (4:02)
So it's food, beverage, pet, wellness, and co-manufacturing within all those sectors. And that's in the size we invest in. So that's families and businesses doing $10 million to $40 million of EBITDA or net cash flow.

**Jack Farley** (4:21)
So you were an operator. You hear this a lot, private equity. We have this operational expertise. We're going to come in. We're going to improve the operations of the business.
How true that is differs from firm to firm, but you really were an operator there. So what is it that you see with family owned businesses, despite the size of many of these companies, that they can improve on operationally? And why do you think that's an opportunity for investors?

**Andy Unanue** (4:47)
There's lots of opportunities within the family business sector. And it's just our model to help on the operational side.
So we are putting moderate leverage. You know, we've closed businesses with no leverage because the family was extremely adverse to any leverage. And then we were able to get them comfortable with it. So we put some leverage on throughout the hold. But our average leverage is kind of like three turns of leverage. And as you're aware in our industry, that's pretty moderate. You know, some people are, you know, five, six, seven, even up to eight times, which is just where we're not comfortable. And neither are the families we partner with. We, you know, we require those families to roll equity back in with us. So while we take control of these businesses and buy over 50 percent, they end up being somewhere 15 to 45 percent of the business after our partnership. So we have to respect their wishes too. And we just, you know, I've never worked in a high leverage environment. So what you do in those businesses is different, right? You're worried about covenants and, you know, you're worried about longer-term experiences. And it's okay if a quarter or two quarters, you know, don't go as planned. We're still able to pivot and get that, you know, straightened out without having to worry about, you know, restructuring the debt or the bank, you know, hammering down on us. So, you know, we love this lower middle market sector.