Berkshire Partners: Party City

By: Victoria Ivashina and Jeffrey Boyar

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Synopsis: In 2005, Berkshire Partners, a Boston-based private equity firm specializing in growth equity, was one year into their ownership of Amscan, the market leader of designed, manufactured, and distributed decorated party goods and accessories. However, Amscan's primary customer, party retail store Party City, was making aggressive moves to backwards integrate and cut into Amscan's profit pool. Even if Party City failed at its attempt, it could cause significant damage to the business, and subsequently hurt Amscan's top line. The Berkshire team needed to figure out a path forward. Should they try to invest in or buy Party City to thwart efforts that would potentially erode both businesses? If they did, should Party City remain a standalone company or should it be merged with Amscan? Would Party City even come to the negotiating table? These questions, plus additional complications with investments from overlapping funds left the Berkshire team in a difficult situation.