In 1872, Fausto Polli opened a small store front selling canned vegetables in the heart of Milan.

Since that humble beginning, the Polli family has grown the business to become a leading European producer of pesto and pasta sauces.

The company today operates four plants in which more than 130 different raw materials are processed, producing approximately 29,000 tons of vegetables and more than 190 million packages every year.

A core segment of the business is private label pesto where the company has a leading position in supplying products to European grocery store chains. Traditional pesto is made of basil leaves, pine nuts, garlic and olive oil – simple ingredients considered to be high in healthy fats and antioxidants.

With family eying further international expansion, Platinum Equity recently acquired a majority stake in the company. The Polli family retains a minority stake in the business together with CEO Marco Fraccaroli, who will continue to lead the company.

“Platinum has a lot of experience helping family-owned businesses leverage our M&A capabilities and global operating expertise to capitalize on market opportunities and maximize their potential,” Platinum Equity Co-President Louis Samson said in a released statement after the deal announcement.

“Polli has built an exceptional brand with a proud heritage, and we look forward to working together to build on that legacy.”

Manuela Polli, Managing Director of Polli and sixth generation family member, said: “We are excited to continue our ambitious journey with Platinum Equity, an important partner who shares our company’s values and goals. We are confident that together we will take the business to a new level of global leadership.”

The Polli investment was led by Platinum Equity’s European Small Cap investment team, which is experienced in acquiring businesses in the food and beverage sector.

Samson, Managing Director Fernando Goni and Senior Vice President Filippo Rossi recently gave their thoughts on one of Platinum Equity’s latest investments.

(Questions and answers have been edited for clarity)

Q: Describe the business.

Goni: Polli is a family-owned business that produces pesto sauces and other condiments. The business is mostly for private label, but they also have around 15% of the business which is branded Polli. They make many other products, but it’s mostly a pesto sauce business, selling primarily to large supermarket chains, so very strong in Europe. It’s a company that did extremely well in developing that pesto sauce market.

Samson: This was a family-owned asset for many generations and divesting it was a big decision. With two prior investments (Fantini Group and DeWave), we’re known in Italy and have a track record to stand on. The advisors knew us, and they contacted us on this deal 18 months ahead of it.

The family wasn’t sure initially they wanted to sell a majority share of the business, and it took a while for them to make that decision.

During that time, our team stayed close and developed a very good relationship with the family, especially with Manuela Polli, who’s really driving change and professionalizing the company. We have tremendous respect for the legacy they’ve built and I think over time the family realized that Platinum Equity would be a good home for the business and its next chapter. We have a shared vision to improve the business and grow outside of Italy in Europe and the United States and believe we can help.

Q: For the uninitiated, what is pesto sauce used for?

Goni: It is a very basic sauce that some make themselves or you can buy from the supermarket. It’s basically basil leaves, oil, pine nuts and cheese. It’s not a very complicated product. I live in the U.K. with my family, and we eat it a lot. When we started looking at Polli, I realized I had pesto sauce both in the fridge and in the cupboards.

Rossi: Italians eat it with pasta, but outside of Italy it is a lot more than a pasta sauce. You can mix it with salads and soups. You can put it in sandwiches. It goes on meat and fish as a topping. And it’s interesting that outside of Italy, pesto as a category is growing fast, mainly for its convenience and its flexible usage in vegetarian diets. And that was one of the reasons that we liked the upside potential on the deal.

Q: It’s another instance of Platinum Equity transacting with a family-owned company. Why does the Platinum Equity approach work when it comes to approaching family or founder-owned companies thinking of a possible exit?

Goni: With Polli, it may have been difficult to make a decision to sell because it’s an asset that has been in the family for a long time. I think aligning with the vision of the family is really important. When that alignment exists, I think what Platinum Equity can provide is operational expertise, resources and the ability to grow outside of these European markets. When that aligns with what the family is looking for, then you have a really good match.

Rossi: Every deal has its own history, and it is important to be flexible and provide a solution to the situation that we have in front of us.  With Polli, the family had successfully brought in professional management from the outside already, and performance had been outstanding with CEO Marco Fraccaroli driving the business from approximately € 90 to about € 200 million in revenues. Platinum Equity has helped the company through this generational transition, which is a sensitive topic in Europe.

Q: What will be the operational focus?

Goni: I think that there’s a path of creating more operational efficiencies. I think the other area where we can support them, and there is an opportunity, is on M&A. We’ll look at opportunities, source them, work with the team on executing those deals, integrating those companies. That’s going to be a major part of the deal going forward, and we can definitely team up with them and help on that.

Rossi: We see Polli as a great platform to continue investing in organic growth and also pursue acquisitions both in Europe and the U.S. There is an exciting ambition to establish a direct presence in new geographies or in adjacent fast-growing product categories like dips, snacks, ready-made meals.

Q: Why does Platinum like the food and beverage sector?

Samson:  We’ve made several investments in food and beverage, both in Europe and North America. We like the food and beverage space because it’s quite a stable market. We look at every segment and geography differently, but some of the fundamentals are the same. We really focus on the attributes, and then we see how we can improve the company that we’re buying. But effectively, it’s generally a stable market with typically good growth characteristics. And we like that.

Q: Tell us about Platinum’s strategy in Europe.

Samson: We’ve been in Europe for more than 20 years and we’ve really supercharged the effort in the last eight to ten years. We invested in human capital and infrastructure, and we built a team that has taken us to the degree of relevance and importance in the market that we’ve reached in North America. We didn’t build the team around American transplants into the European market, but instead addressed the European reality by having a multicultural group that understands local culture and speaks the languages, whether it’s Italian, French, Spanish, German, Portuguese, Dutch or English. We have also replicated our full suite of operational and carveout personnel and capabilities on the ground at the European level, which is a hallmark of Platinum’s approach and a big differentiator for us. So far, it’s paying off. We’ve been very active and we like our current position in the market.