Pregaming the Chicago Office Show: NEOCON

Categories: NeoCon, News & Events | Published: Jun 7th 2018

The environment heading into Neocon is upbeat—with stock prices high, the general economic environment strong and the M&A industry hot. This confluence of positive indicators, along with the recent announcement of a terrific new acquisition for the industry, leads Stump to be bullish about the show next week and the M&A market for the 2^nd half of 2018.

We are pleased to share that HAT Contract has been purchased by Innovative Workspaces, a portfolio company of Cathay Capital, a global leader in cross-border private equity investing. This is a terrific marriage of two companies that are on-trend producing products for the open floorplan, non-cubicle work environments now mainstream and on the rise. Stay tuned for exciting joint product launches and initiatives from these two companies. Stump was honored to represent HAT Contract and its owners and management team, Tony Glaves and Brian McNay.

We are bullish on continued M&A activity in the furnishing space, due to the following:

Asian buyers continue to seek U.S. assets and brands, as they aggressively seek larger market share in the residential sector. In 2017 we saw Lexington, Baker and Rowe go to large Chinese players. Plan for more acquisitions in 2018 and beyond, as Asian companies go public and seek to move wealth out of Asia. Just last week we witnessed the announced acquisition of Ekornes by Qumei for $638 million.

Private Equity made a splash in 2017 in the furniture industry with initial positions in Brown Jordan, Klaussner, Southern Motion and Standard Furniture. Prepare for additional PE entrants and bolt-on acquisitions from well-known PE names this year. And as we all know, PE buyers eventually become sellers, so we expect some liquidity events from several PE holdings.
- We were pleased to represent Fusion Furniture in their sale to Southern Motion, and Albany Industries in their sale to Standard Furniture. Both transactions are bolt-on acquisitions to 2017 Private Equity platform company investments.
U.S. strategic companies are seeking acquisitions. With stock prices high and bank lending still abundant, we are getting a green light from our larger companies for add-on companies. Typically, the search for add-ons is led by a specific need for geographic expansion, product extensions (particularly casegood companies to add upholstery to their product line ups) or technology add-on needs. The recent corporate tax cut, and resulting increased cash availability, is also leading larger corporations to consider acquisitions.
Blending channels continues with hospitality, commercial and residential segments blurring.

Things to look for as you prepare to walk the halls of Neocon:

E-commerce growth: This remains the fastest growing sector of our industry and many companies still have no idea how to tackle this portion of their business. Amazon, Wayfair, Office Depot and others are continuing to make major inroads into the industry, which impacts everyone.
Ergo/motion products: We continue to see more and more electronics, power, lighting, USB ports, and innovation in all sectors of furniture. We believe the intersection of electronics and furniture is becoming more user friendly.
Open floor plan/collaborative spaces: With densification continuing as real estate prices rise, we see the mainstreaming of open floor plans with increases in collaborative spaces.

These are exciting times to be in the industry. Give us a call if you would like to discuss valuation or a transaction in this fast paced ever changing industry, and we can set up a time to meet at Neocon. We look forward to seeing you there!

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Pregaming the Chicago Office Show: NEOCON

Categories: NeoCon, News & Events | Published: Jun 7th 2018

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