Aug. 20, 2018

China Update

Stump Companies
Tim Stump
by
Tim Stump

Chinese tariffs? Currency manipulation? Banking bubble? We had to go to China to see for ourselves.

Our 8-day trip to southern China and Hong Kong was very eye opening. Again, we witnessed this powerful country’s strong infrastructure moves, continuing construction of massive factories and skyscrapers, and hordes of people at every turn.

Tariffs were the main topic of discussion. There is general concern that the duties will endure and long be painful to Chinese exports. Asian furniture companies are already looking for solutions, through shifts to Vietnam (where there is not much more labor available) or other parts of the world, including Mexico, or by buying US factories. Are the tariffs a long-term issue or is a negotiated settlement on the horizon?

These discussions are one of the driving forces in M&A activity, along with the abundance of capital from Private Equity (PE) funds, banks, family offices, and strategic buyers. The general economy continues to show strength, giving buyers confidence that the US economy is on solid footing for future growth. And the US corporate tax cuts are meaningful, generating more cash flow and available funds for deals.

Private Equity players have been in the news with the final saga and demise of Heritage Home. Dating back to 2013 when Furniture Brands filed Chapter 11, and was subsequently acquired by KPS, the businesses failed to find stability and revenues continued to decline, with losses mounting. Selective divestitures of Lane and Lane/Venture, and now Hickory Chair, are just the beginning, while the balance of the brands and assets will be sold or liquidated via the onerous bankruptcy process. Many of our stronger market participants have enjoyed great new business opportunities as a result of HHG’s weakness.

On a positive note, there are some terrific new PE owned platforms that are performing very well, growing both organically and via acquisition. We expect this trend to continue well into 2019 and hope to make some announcements in this sector in the coming months.

It’s a busy summer, but with long flights we have had plenty of time to read. We have listed our favorite books below:

  • The Vintage Caper by Peter Mayle (great France/wine novel)
  • Shoe Dog, by Phil Knight (a memoir by the founder of Nike)
  • World Order, by Henry Kissinger

Let us know if we can be of service to you.

Tim Stump

Related News

Stump & Company Charlotte NC
Company News

Q1 2021 Update

The Stump team had a strong Q1 performance as the home furnishing industry continued its own impressive growth trends.
Stump & Company Charlotte NC

Q1 2021 Update

The Stump team had a strong Q1 performance as the home furnishing industry continued its own impressive growth trends.
Axial Top 50 M&A Advisors for 2022
Company News

Stump Named in Axial Top 50 M&A Advisors

by Bo Stump
Stump & Company has been named in Axial's top 50 list of consumer-focused private equity firms and M&A advisors for 2022. Read the full report featuring insights from Bo Stump.
Axial Top 50 M&A Advisors for 2022

Stump Named in Axial Top 50 M&A Advisors

Stump & Company has been named in Axial's top 50 list of consumer-focused private equity firms and M&A advisors for 2022. Read the full report featuring insights from Bo Stump.
Furniture Industry News
Company News

M&A Briefing: Quarter 1, 2015

For the furniture industry, spring marks the beginning of a fantastic run of markets: Southeast Asian markets, April High Point, HD-Vegas in May and Neocon-Chicago in June. Huge times for all sectors of the furniture industry to see customers, present new products and to advance their strategic vision.
Furniture Industry News

M&A Briefing: Quarter 1, 2015

For the furniture industry, spring marks the beginning of a fantastic run of markets: Southeast Asian markets, April High Point, HD-Vegas in May and Neocon-Chicago in June. Huge times for all sectors of the furniture industry to see customers, present new products and to advance their strategic vision.
Stuart and Tim in High Point
Company News

2017 in Review & 2018 in Preview

The 2017 M&A climate was robust, at levels not seen since before the 2008 crash. This meant a terrific year in furniture acquisitions and for Stump & Company.
Stuart and Tim in High Point

2017 in Review & 2018 in Preview

The 2017 M&A climate was robust, at levels not seen since before the 2008 crash. This meant a terrific year in furniture acquisitions and for Stump & Company.