Sun Capital a rising force in furniture
By Larry Thomas -- Furniture Today, April 30, 2007
Boca Raton, Fla. — Sun Capital Partners doesn't appear on anybody's list of the largest furniture retailers or the largest furniture manufacturers, but the Florida-based equity investment company looms large in the boardrooms of many of the industry's best-known companies.
This year alone, the firm has acquired two manufacturers, made significant investments in one manufacturer and one retailer, and sold a retailer it had acquired in 2002.
Those companies were added to a furniture portfolio that included three other retailers and one manufacturer acquired since 2002.
The acquisitions have come at a time when wagering on a roulette wheel might seem less risky than an investment in the furniture business, but Sun Capital believes its deals are anything but gambling.
"We are long-term investors," said Aaron Wolfe, a Sun Capital vice president who has been involved with several recent furniture industry acquisitions. "Yes, the industry is a little depressed now, but we're looking at what it could be in five or six years."
Wolfe said Sun Capital is attracted to companies with strong management teams that, with some additional financial and operational assistance, will have a long-term competitive advantage in the industry.
"Our strategy is to work with the company's management, not replace them," Wolfe said, noting that many Sun Capital executives have been CEOs or CFOs earlier in their careers.
Furniture executives who have worked with the firm agree, saying their new owners have never attempted to micro-manage their companies.
Phil Haney, president and CEO of Lexington Home Brands, Sun Capital's first major furniture industry acquisition in 2002, said Sun Capital is different from the typical private-equity firm because of the broad knowledge of its managing directors.
The people working with the various holdings like Lexington, he said, have managerial experience, not just financial backgrounds.
Chris Metz, the director working with Lexington, previously was president of faucet maker Price Pfister, lock maker Kwikset and the Hardware and Home Improvement Group of Black & Decker.
Haney said it has been "really great" working with Metz because he knows what it's like to run a manufacturing company. Haney said he can use Metz and the rest of Sun Capital's management team as a sounding board when he has ideas or challenges and take advantage of their expertise.
Lexington was sold because its former parent company, LifeStyle Furnishings International, was selling off all its holdings. But a more typical scenario calling for Sun Capital's involvement occurred later that year when retailer Nationwide Furniture filed for Chapter 11 bankruptcy protection.
Sun Capital swooped in and acquired majority interest in the retailer at a bankruptcy auction.
And even more typical was the predicament in which Rowe Furniture, a 60-year-old manufacturer, found itself last year.
Rowe's new ERP manufacturing process was expected to streamline and take the company's operations well into the next century. Instead, it produced what the company described as "significant issues" — corporate jargon for slacking quality and inexcusable service.
That, combined with the worst price hike in raw materials in recent history, soft business at retail, and dozens of competitors drawing off its customers, put the company on the precipice of going under when executives of Sun Capital arrived to save the day.
Sun Capital was the only bidder in a bankruptcy auction for one of the best-known companies in the industry. And Gerald Birnbach, the company's former president and CEO and a 50-year company veteran, can only see the alliance as a good thing.
"They're very nice, and very professional," Birnbach said. "They've got fresh minds and they think a lot of this industry and they think a lot of things are going to be happening."
The acquisition of Powell Co. in January, on the other hand, wasn't as typical for Sun Capital.
Powell is known in the furniture industry for product innovation, speed to market and having one of the best infrastructures in Asia.
Powell President Bill Benton said when New York-based private investment firm Windward Capital Partners II, the company's former majority owner, hired investment banker BB&T Capital Markets to sell Powell, Sun Capital emerged as the one who could close the deal quickly.
"Lots of venture capital or investment funds will tend to take 60, 90 or 120 days to go through the due diligence process. Sun did it in 30 days," Benton said.
Wolfe said such speed and decisiveness gives his firm a competitive advantage over others who may get involved in bidding for a company — particularly a strong one such as Powell.
"We finance everything with our own funds, so we don't have to look for financial partners ...and we are very focused on getting things done," he said.
Benton said the due diligence questions asked by Sun were on point.
"They asked the right kinds of questions at the right times which indicated knowledge of the process," he said.
Sun Capital brings two important aspects to the deal business: certainty and speed, said Matt Gilman, senior vice president in investment banking at BB&T Capital Markets.
"They get back to you very quickly, and they very much deliver on what they say in the beginning of a process," he said. "There's some real value in certainty. Time is never your friend in the deal business."
As Sun Capital has success turning around troubled companies, the Powell deal breaks the mold, putting it in a category not exclusively focused on turnarounds and operational guidance, but one with a deep understanding of the industry and an interest in buying healthy companies, Gilman said.
"After two-and-a-half months, the read is very positive," Benton added. "They're not micromanaging the organization.
"They quickly acknowledged that the management team is in place because of the knowledge of the industry and they're here in a support position."
| Acknowledgements | ||
| Upholstery editor Gary Evans, senior retail editor Clint Engel and staff writers Jeff Linville and Heath E. Combs also contributed to this story. | ||
