2 industry execs weigh family operations against private-equity deals

HIGH POINT – According to merger and acquisition advisor firm Stump & Co., which focuses solely on furniture and related industries, the residential furnishings industry today has more than 40 companies controlled by private equity firms. As of 2022, PE accounted for 30% of deal activity, making it a critical feature of the merger-and-acquisition (M&A) landscape.

In 2023, however, that activity slowed down, leading Stump to believe large amounts of equity are sitting on the sidelines, ready to pounce as the economy stabilizes.

Recently, and to make matters more complex, much of the industry narrative has shifted against PE, thanks largely to the recent closures of Klaussner Furnishings and Mitchell Gold + Bob Williams, both of which were PE-owned. Each of these closures resulted in hundreds of layoffs without notice to employees.

According to Furniture Today Editor in Chief Bill McLoughlin, PE has become the furniture industry’s “four-letter word.” Several family-owned furniture companies have more or less agreed.

Michael Amini
Michael Amini

“I don’t necessarily like it, to be honest,” said Michael Amini, founder and CEO of the high-end supplier Aico. “Companies that only look at numbers and just want to manage it like another business. The furniture industry is unique. It’s based in relationships. You have to have a good understanding of the industry. You have to know consumers, trends, direction, trends, quality, etc. All of those things are extremely important.

“Look at Klaussner and United going out of business,” he continued. “I hope there aren’t too many more. In my opinion, selling a company through M&A is not the right way to go. I hope that our children in the industry join. They should have much more understanding of the industry if they’ve been involved with their parents.”

Keith Koenig, CEO and founder of the family-owned Florida retailer City Furniture, also expressed the importance of family ownership.

Keith Koenig City Furniture
Keith Koenig

“The family concept allows us to build the culture we have and that benefits our customers and our associates,” he said. “We have a culture PE firms simply cannot match. The failure rate in furniture of buyouts of retailers by PE has been high. Generally, the associates that built the business end up losing. That said, family businesses like City Furniture need top notch talent and plenty of innovation and hard work to succeed over time.

PE ownership does have some value said Koenig, but it’s more on the financial side of things.

“Consolidations and outside investment into furniture will continue, and that is not all bad,” he continued. “Outside firms have capital and expertise some furniture companies need. On the other hand, PE firms are in the ‘money business.’ We are in the family furniture business. What’s the difference? We play the long game and do not leverage debt beyond mortgages secured by our properties.

“Conservative fiscal management and hardworking associates that care for customers, plus smart risk-taking for growth lead to long term success. Look at Ron and Todd Wanek and Ashley as the model for what a family furniture business can be. I doubt any outside company could be nearly as successful.”

See also:

Credit to Source link

Leave a Comment