In the interior design industry at least, there is likely to be another big outbreak in 2021: merger and takeover fever.
If you are a buyer there are many options; If you’re a seller, the time to move could never be better. “This is going to be an enormous year for M&A activity. I think we’ll see 50 percent more in 2021 than ever before,” he says Randy Eller, President and Director of Eller Enterprises, Tennessee, a consulting firm specializing in the gift and home industry that has been involved in some of the most iconic deals over the past decade.
A number of key factors could indicate an unprecedented level of activity in buying and selling businesses. A large? Supplier companies are rethinking what they want to do with their businesses.
“It’s really important to talk about cause and effect – and the cause of all this activity is that everyone blew up their business models [during the pandemic]Says Eller, who was a senior executive at retailers like Kirkland’s and suppliers like Russ Berrie and CBK before starting his own consulting business. “Suppliers know they need to build their infrastructures and technology to stay in business so they can sell directly to the consumer [in addition to maintaining their wholesale business]. If you decide to make this investment, you are looking to the future. “
CEOs who are unwilling or unable to make such investments – whether due to a lack of working capital, the age of the owner, or succession plans – will seek to get out. “This year there will be a lot of sellers and the companies that have done well will be looking for acquisitions.”
Eller predicts that money won’t be an issue with doing business in 2021. “There is never a shortage of capital when there is a willing buyer and seller,” he says. “There is an unlimited amount of money [available to chase deals]. ”
Buyers and sellers come in all shapes and sizes, he says, and the deal that makes sense for one player may not be right for another. Eller sees both strategic partners and private equity firms as likely buyers “who are pretty evenly split this year.”
Outside investors generally want to buy companies with annual sales of $ 75 million and above, and are generally willing to pay more than strategic buyers. The latter do smaller deals, but the type of business they want depends on the buyer’s plans: if they have a two year window before they want to get out themselves, they may just want solid, profitable purchases. However, if they have a longer window – say five to ten years – they may be looking for a fixer-upper if the price is right. Salespeople have to understand these dynamics, says Eller, and also decide whether to stay with the company after the sale or just take the money and get out. If they stay, they will have to consider who their partner (and most likely boss) will be.
In any case, Eller sees numerous offers for the furnishing and gift industry this year. But he doesn’t see it as the end of the smaller, entrepreneurial startup. “This industry has always been nurtured by creative people, and that’s not going to change,” he told Business of Home. “Everyone is always looking for the next hot thing and it will always be out there. That’s the good thing about this industry. “
Home picture: Gui Yong Nian | Adobe Stock
Warren Shoulberg is the former editor-in-chief of several leading B2B publications. He was visiting professor at Columbia University Graduate School of Business. received awards from the International Furnishings and Design Association and the Fashion Institute of Technology; and has been cited as a leading industry expert by the Wall Street Journal, New York Times, Washington Post, CNN and other media outlets. His Retail Watch columns provide comprehensive insights into key markets and product categories.