Business Description:
Pumpkin Masters is the largest manufacturer and distributor of pumpkin carving kits and related accessories in the United States with over $11 million in revenue. The Company has a customer base of over 2,000 retailing companies and mail order houses (7,000 total retail locations), including Wal-Mart, Target, Kmart, and Michaels Stores. Pumpkin Masters has 80% of the market for carving kits.

Transaction Background:
Founded in Denver, Colorado in 1986, Pumpkin Masters was purchased in 1997 by Security Captial Corporation ("SCC"), a diversified holding company. Over the years, SCC's business became focused on healthcare, and, as a result, in late 2003, SCC identified Pumpkin Masters as a non-core business and hired Edgeview Partners to sell the company. Due to the size and seasonal nature of the business, the auction was unsuccessful and Milestone was contacted to review Pumpkin Masters as an add-on acquisition for Rauch Industries. Milestone began negotiations to purchase the company in March 2004 and concluded the transaction 8 months later.

Investment Thesis:
As a small, non-core division of a mid-sized public company, Pumpkin Masters suffered from a lack of corporate attention and resources. Consequently, Pumpkin had been unable to invest in the business and was losing market share. Pumpkin Masters is a perfect strategic fit with Rauch, as Rauch is focused solely on Christmas. Rauch was able to use its underutilized operating assets and China sourcing capabilities to cut duplicative costs and personnel, smooth out working capital requirements, and broaden Pumpkin Masters' presence with key mass retailers. Furthermore, with a focused, entrepreneurial management team, the company was able to improve its operating margins and increase its share of the pumpkin carving kit market and the general Halloween industry.