Summer Update on M&A

Markets

July is always an enjoyable time for attending both the Atlanta Casual Show and the Las Vegas World Market. We attended both shows – traffic seemed a bit dampened by the terrible summer heat and the tariff / trade concerns. 

Quote of the Market: “Stop talking about tariffs and start talking about lowering interest rates to get the housing market going,” opined one seasoned CEO.

So, what is really going on?

The high end of the residential furnishing industry is doing fine, as wealthy consumers continue to spend on their 2nd and 3rd homes and remodel primary residences at a nice clip. Promotional suppliers and retailers are struggling as their core consumer has most acutely felt the pinch of inflation, high interest rates, affordable housing issues, and the general uncertainty in the economy (mostly due to tariffs and geo-political noise – and persistently high interest rates). We are witnessing a number of business closures and restructurings among importers, manufacturers, and retailers alike. Those with domestic factories are enjoying improved interest from retailers, yet with softer demand, are not necessarily seeing the revenue increases they had anticipated earlier in the year - and are reluctant to invest further in US manufacturing until things improve. 

Commercial furnishings are holding up better, as hoteliers are remodeling and adding new construction; offices need new, more attractive furnishings to attract employees back to work; and healthcare and education sub-sectors (amongst others) remain strong. On the other hand, the US Government - the world's largest purchaser of furniture - is abandoning square footage and putting the brakes on much new purchasing activity.

In our conversations with CEOs, we continue to see a fork in the road, a demarcation; strong, well-capitalized businesses are pursuing acquisitions and making plans to gain market share in this down market. They are looking for bargains, investing in human capital and technology (AI!) to propel them forward. On the other hand, many are struggling just to meet the monthly payroll and lease payments, falling behind in new product introductions and inventory positions, and gradually losing market share. And more expensive borrowing costs only add to the challenge. 

The baby boomers are nearing retirement and mostly want to exit, so M&A discussions are constant. Our counsel to prospective sellers is getting ready now for the upturn we had all hoped for in 2025 but is now likely delayed to 2026 or later. The latest wisdom is now to "take your licks til’ 26’."

So, get your house in order now, with a plan to sell 6-24 months down the road. Most helpful to preparation are ensuring accurate, accrual-basis financial statements, retaining a transaction lawyer (or at least bringing them into the fold), and start interviewing investment bankers / M&A Advisors (we’re here to help!) to get organized for a sale process, and align on valuation expectations. The average sales process takes about 6 months, and the best deals are ones where forethought and planning have occurred for many months, ideally years, beforehand. We have 53 years of experience helping owners sell their business and monetize all the effort they’ve invested over many years.

Who are the Buyers?

• Strategic buyers who have cash and want to take market share while there is weakness and distress in the industry.
• PE and other Institutional Investors – many investors have a thesis that the home furnishings sector should really pick up once rates decline and housing improves. And should be strong for years to come thereafter. With so many PE owners currently invested in the industry, there will, by necessity, be many transactions in the short term as they sell those positions, and new investors acquire into the industry.
• China will remain a factor, as wealthy Chinese buyers want to get capital into western markets like the US via investment. Large manufacturers in China will also acquire US companies as a hedge to continued tariff threats. 
• E-Commerce will re-emerge as a growth channel, and we expect to see significant M&A activity in this sector.

Oh, Canada!

We have been to Canada twice this year and, amazingly, the tariff discussions have created a swell of nationalism among Canadians and our friends there are seeing 20-30% growth rates as Canadian consumers and retailers are focusing on Canadian made goods. And many US retailers want to support the Canadians as well. 

M&A Update

The Stump team has been busy this summer with two recently closed transactions: 

1. Sale of Ladco, a Houston based showroom to the trade that also offers amazing interior design capabilities to high-net-worth clients outside of the region, and 
2. Sale of a commercial furniture e-commerce distributor to hospitality and foodservice environments (the deal remains unannounced as of this writing). 
3. In addition, we are actively working to close two additional transactions currently under LOI (Letter of Intent) and set to close in the next couple of months. We are actively underwriting several exciting new opportunities.