September Update

It is a crazy time we are living in, with Canadian tariffs, more bankruptcy news, ongoing wars and conflicts, and a sky-high stock market. It can be hard to make sense of all these divergent external factors and how they relate to the furniture industry - but let us take a stab at it.

M&A Update

First, M&A activity is robust. Ambitious and well-capitalized companies are making moves to expand product lines, add capacity, and enter new channels and markets. A few recent examples:

1. Flokk – a leading task seating manufacturer – just announced its acquisition of ErgoCentric in Toronto, which is on the heels of its acquisition of Spec Furniture earlier this year (a deal that we facilitated). These acquisitions help the company expand further into Canada and adjacent vertical markets like healthcare, government, and more.
2. Somnigroup  just announced its completion of the Leggett & Platt acquisition. Somni now absorbs billions in additional revenue and manufacturing capability, becoming an even more vertical giant.
3. Closer to home, we were pleased to announce the acquisition of Viridien Patio + Fireplace by Watson’s, a leading retailer of outdoor furniture, hot tubs, and other products. This acquisition allows Watsons to expand into the fast-growing Carolinas region (outside its current hubs in Ohio and Florida).
4. We were also pleased to announce the sale of the Kroehler upholstery factory in Conover, NC this past week. This is a fantastic, fully equipped upholster factory that had served American Signature/Value City. The plant closed last December, and our view was a US or international furniture manufacturer would buy the facility for their own capacity. However, we ultimately sold this very nice building to a non-furniture buyer. There are other projects like this one available, so please call us if you need North American upholstery capacity.

We have four other LOIs (Letters of Intent) signed and set to close before the Holidays. Buyers are coming in all stripes, ranging from Strategic Acquirers, Private Equity Investors, International companies, Family Offices, and holding companies. While the economy – and our industry – can feel shaky at times, we are certainly finding a path forward and there remains tremendous capital on the sidelines looking for deployment opportunities

Other key topics in the news these days:

• Canadian tariffs: new 50% tariffs are now in place and wreaking havoc among manufacturers north of the border. Our phone is ringing off the hook as Canadians are looking for alliances in the US to hedge tariff exposure. And US firms are suffering in the Canadian market given reciprocal tariffs and political blowback. Most believed the Trump administration would back off, but this has not happened – at least not yet. All eyes are on how this will play out – we are hopeful for a quick resolution.
• Motion turmoil: We recently learned of Southern Motion’s Chapter 11 filing, which appears to be a Manwah restructuring of its 2025 purchase. Also, Moto Motion has made public making statements about its Palliser Furniture acquisition and intentions to re-imagine that business. Both these companies are visible, publicly traded international players and we suspect this will be a recurring topic at High Point market next month.
• Ethan Allen: This company has been a shining star of the industry ever since Farooq led the acquisition in 1989. Ethan Allen is among the most profitable companies in the industry but has drawn notable criticism lately from external voices.
• Housing: the furniture economy remains stuck in neutral as higher interest rates continue to dampen new home purchases. The good news is demographics are on the industry’s side in the medium-to-long term, as large cohorts of Millennials and Gen Z enter prime earning and family-rearing years. It will take time, but the next 5-15 years should ultimately be strong ones for home furnishings as these younger Americans acquire housing (and furniture!).

In our opinion, Fall is the best time of the year, with the weather cooling and football starting up. We also eagerly await the October High Point Market and a slew of other industry events, including Healthcare Design (New Orleans this year), EdSpaces (Kansas City), and Orgatec (hosted every other year, in Cologne, Germany).

We look forward to discussing these and other topics. And as always, feel free to reach out to us to discuss your M&A thoughts.