Client Overview

Established in 1979 by Reuven and Zehava Itelman, Herco is one of the largest gold jewelry wholesalers in the United States. Herco’s catalog is a mainstay for thousands of independent jewelers who rely on it to source unique and high-quality merchandise.

Reuven built a business that required minimal outside reporting, with no debt and no stakeholders outside of the Itelman family. Having reached retirement age, Reuven and Zehava consulted with several jewelry industry M&A advisors and brokers, being told they should expect no more than the melt value of the inventory, with no value resulting from the Herco brand, loyal customers, trained employees, or unique vendor relationships. The industry specialists advised a liquidation of assets being the likely outcome. Reuven and Zehava desired a better end result for their customers, while employees wished to see the brand continue.

Merit Investment Bank Approach

Though Merit Investment Bank & Company is not a jewelry industry M&A specialist, many of its bankers hold prior experience advising on the sale of JC Keepsake Diamonds to Stateside Management, as well as Rogers Jewelers sale to Gitanjali Gems. Merit Investment Bank was also an advisor to Whitehall Jewelers prior to its bankruptcy liquation. In each of those cases, Merit Investment Bank delivered a premium outcome for stakeholders, so the possibility for a similar result was anticipated for Herco.

Merit Investment Bank managed a limited scope auction with an identified group of qualified financial sponsors and strategic acquirers. A choice was delivered between an industry focused family office buyer, and a strategic buyer who had long competed with Herco. Hoping to continue a family legacy, the Itelmans selected the family office buyer. 2022 was a tough M&A environment, however, as interest rates rapidly rose and financial market concern around future discretionary spending became more acute. As a result, the family office exited the deal, leading the Merit Investment Bank team to return to two other qualified strategic buyers. One of the buyers resonated with the Itelmans due to a great family legacy of its own. This family firm, Quality Gold, though in process of going public, appreciated the true value of the Herco brand, and made a compelling offer.

Results

Quality Gold as a leading participant in the industry had acquired over 20 companies over its history and had a defined approach for closing deals. Merit Investment Bank worked closely with the Itelman family to address Qualities inventory focused due diligence, while demonstrating the brand’s value. In the end, Herco was acquired by a reputable and growing industry participant that now features it as their premier brand. The purchase price was substantially more than the melt value of the inventory, and the Itelmans are assured of a very comfortable retirement.