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Q&A: How will Lexington, Sligh work together?

Thomas Russell -- Furniture Today, January 30, 2012

Phil Haney, left and Rob Sligh at Lexington’s showroom in Thomasville, N.C.HIGH POINT - Before the October High Point Market, case goods and upholstery resource Lexington Home Brands acquired Sligh Furniture, a 131-year-old, upper-end supplier of home office and home entertainment furniture.
     At market, buyers got to see both brands presented together for the first time at Lexington's 100,000-squarefoot showroom. At this week's Las Vegas Market, the two companies will continue to show in separate showrooms on the 11th floor of World Market Center Building C.
     Many in the industry view the two companies as friendly competitors that complement each other's core strengths. Sligh's expertise in home office and home entertainment will help Lexington grow in those categories. Lexington also will be able to merchandise its case goods and upholstery mix alongside Sligh's core product mix.
     After the deal was announced, Furniture/Today sat down with the leaders of both companies, Phil Haney of Lexington and Rob Sligh of Sligh, to learn their thoughts about the deal and what resulting opportunities they see.
     What made this deal attractive to both companies?
     Haney: Rob and I have known each other for a number of years and have become friends ... and every now and then we would tour each other's showrooms. Rob's company specialized heavily in home office and home entertainment product and we're a total lifestyle producer. So while we're somewhat competitors, we're not really direct competitors either. But the more we got to know each other and the more I got to know the Sligh brand, and Rob got to know the Lexington brand, we found a lot of similarities in the companies. Those similarities are a dedication to great style and great design, a dedication to great quality product and retail partnerships. We find we share a lot of the same dealers, although we both find we have unique dealers too.
     Sligh: We were looking for a way to accelerate growth and were looking for the right kind of partner. Lexington was our number one choice because of several factors. One is that the cultures are very similar in terms of being very gracious, friendly, hardworking and design-oriented, so it felt like an immediate fit from the beginning.
     In recent years, your companies have gone through similar transitions on the wood side, shifting from U.S. manufacturing to an overseas sourcing model. How do you expect your overseas sourcing capabilities to align?
     Haney: That is a big part of what works with this. Lexington has a pretty good sized global sourcing organization. These are actually employees of ours. We have roughly 60 people who manage our global sourcing and supply chain operation. Sligh, in most cases, was using third party services overseas. One of the synergies is to utilize the Lexington sourcing operation to assist Sligh in moving even quicker and more efficiently through this whole global menagerie we all operate in. Right now we don't share any common factories. That's not to say we won't in the future.
     Sligh: With some of the products, we plan on continuing to just keep producing them in existing locations. But we have a lot of ideas for new things and new growth and that's where we are definitely going to be tapping into Lexington's infrastructure. We are going to look for the best of both worlds.
     How similar is the dealer base of both companies?
     Sligh: We were a little surprised on both sides of the equation about how many opportunities there are where we have a strong presence with Sligh where Lexington isn't there and where Lexington has a strong presence where we don't have a strong presence. The synergies there are kind of amazing since we pretty much are aimed at the same customer.
     Haney: I think Lexington has a little stronger presence in international business. We have a pretty significant business in Asia and Mexico and Canada, places where Sligh isn't maybe as active, so I think that gives us an opportunity there. Domestically, probably about half the distribution is common and half is unique to each brand.
     What does this deal do to the identity of a 131-year old brand like Sligh?
     Sligh: How a 131-year old company survives that long is that it is willing to make a lot of changes.... We are going to continue to change and evolve but first of all, the fundamental thing for the Sligh brand is to make sure we are really good at paying attention to consumer electronics and the functional needs in that area. We want to have that focus, and I think what helps the Sligh brand to be a leader in that area is to do a better job than anybody else and knowing what those electronics trends are so we can beautifully accommodate them. We are going to keep doing that.
     How else can the two companies complement one another moving forward?
     Sligh: When you think of a room where there is a flat screen television, there is some home entertainment furniture or maybe a TV console. That is where Sligh comes in. But there are also occasional tables and seating and lots of things that go with that and Lexington is very well equipped to bring that in. Some of the things that Lexington has in its line right now are great for that, and some of the things that will develop and evolve will be great for that.
     Haney: It's not about just buying (a company) because you can buy it. It's buying something because you see an opportunity to put two companies together that can become bigger than the sum of their parts. And, as Rob stated earlier, the culture of the companies is similar, the work ethics are similar, and the commitment to great design is there. And the fact that Sligh is dominant in the home office and home entertainment category really complements what Lexington has been doing. It's one of those things where it really just is a good fit. The interesting thing to us is that in the last couple of days, we have each had dozens of phone calls from people congratulating us on the deal. And what's neat is to a person, they have all said "this makes perfect sense." ... Nobody is looking at it saying "why would they do that?"
     What are the challenges of making this work?
     Haney: There is a lot of hard work to do, but we have done a lot of it already. For us it is less about challenges and more about opportunities.... One thing that excites us about this is by putting these companies together, we think we can offer retailers a different way to come to market and an opportunistic way to grow their business with consumers. Rob has talked about consumer electronics a couple of times, and there are probably not many categories of product that are as hot right now as consumer electronics Consumers seem to be, even in a difficult economy, willing to spend on technology, on flat screen televisions, on video recording devices, gaming systems and telephones. So many of the products that Sligh produces relate to those categories.
     Sligh: The average highend home has seven TVs in it ... and TVs need to be accommodated with furniture.... There is a lot of opportunity throughout the house for a lot of pieces of good furniture. What is so exciting about this is to be able to add some beautiful upholstery and tables from Lexington and you have this huge opportunity within homes.
     What about home office? Is the category relevant to today's consumer?
     Haney: One thing I learned from Rob during his presentation (to reps in late September) is that there is this concept that because consumers are using laptops and iPads, they no longer use desks. That's just not true.... The fact is people still have iPads and iPods and laptop computers, but you still need a place for your papers and you still need a place to write and you still need a place for files and things like that.... The Sligh product line incorporates a vast array of different style home office product and formats ... that help the consumer live the way she wants to live.

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