by HIGH POINT — We believe we are on the cusp of a new M&A wave, and our team is gearing up for a huge season of transactions. The primary drivers we believe will be:
Tariffs
The furniture industry is bracing for tariffs from the Trump administration, and many are making moves to insulate themselves from the threat. Canada- and Mexico-based firms are seeking U.S. assets — via M&A — to protect their market position or circumvent their exposure. Chinese firms are looking for ways to mitigate their already imposed tariffs, and M&A will be an option and possible solution.
Private Equity
Our industry has many prominent companies owned by PE firms and most of these have been held for well over five years (in some cases 10+ years). By definition, PE firms buy, then sell, so we expect many transactions to occur from this cohort. We are also getting inbound calls from new PE firms considering an investment in the industry. Buyers and sellers are increasing, which bodes well for a healthy M&A market.
Disaster Furnishings
We are seeing geographic spikes in furniture sales: hurricane-battered Florida’s west coast, LA’s wildfires and North Carolina’s flooded mountains, to name a few. Natural disasters are unfortunately increasing, and this will spur industry growth as insurers pay out claims and homeowners look to rebuild and (re)plant roots in communities across the country.
The forecast is bright
While the past few years have been choppy, most prognosticators are predicting a strong multiyear growth pattern for home furnishings, because of the expected uptick in housing starts and new home formations. The aging of the baby boomers, the rise of the millennials (and Gen Z?!), the transfer of generational wealth, and hopefully a catch-up of some 6 million homes our country is short on all point to better days ahead.
Future Opportunities
The future of the furniture industry’s M&A marketplace looks promising, with several opportunities on the horizon:
Luxury
The wealthy are buying new homes, seeking second and third homes in resort areas and furnishing their abodes lavishly. They are also far less sensitive to interest rate pressures or generic inflation on everyday goods. We expect this trend to continue as the wealthy seem to only get wealthier.
Domestic Upholstery Manufacturing
More and more customers want domestically made goods with custom options. We believe there will be many upholstery opportunities in the market in 2025.
The Design Community
With over 100,000 designers/decorators nationally, and some 40% working in small firms, smart companies will find ways to attract their business. Technological innovations will enable this and make it more economical to interact with this critical customer. Did you see all the new exhibitors at the Las Vegas Market trying to conduct business with the design community? This massive shift in who and how furniture is purchased is already here.
Casual/Outdoor Living
The move to outdoors was accelerated during Covid and it continues today. We are seeing the emergence of new and exciting products and companies in this sector and expect above-average growth for the next few years. Note the Hooker acquisition of Sunset West in 2021.
Direct to Consumer
E-commerce has had a bad reputation in the past few years, and many failures have been witnessed. However, we are beginning to see some companies turn the corner and become profitable in this competitive “endless aisle.” M&A will play a role in bringing legacy players into the DTC and e-comm market. Note the acquisition of Noble House by GigaCloud Technology.
Legacy Brands
We expect to see more global investors enter the U.S. marketplace via acquisition of legacy brands. Note the Karat Home acquisition of Z Gallerie. With huge outflow of Chinese money and other international investment interest, M&A will accelerate in the coming months and years. The proposed Trump $5 million Gold Card for immigration may accelerate this trend.
Hospitality
Post-Covid, the hospitality sector is thriving and many of our residential players have entered the industry or expanded their hospitality offering. We expect more of this in the coming months and years. And these offerings will expand into other commercial sectors such as health care, education and broader public space applications.
Whole Home Décor
Traditional players selling case goods or upholstery are now shifting to whole-home appeal with full room settings adorned with case goods, upholstery, rugs, lighting and decorative accessories. M&A is front-of-mind for growing companies that want to expand their product range.
Conclusion
The emerging M&A marketplace in the furniture industry is coming. Our backlog of new opportunities is at an all-time high, and the anticipated closing of transactions suggests that 2025 will be our best year ever. Call and let’s start a conversation about the next transaction. See you in High Point in the next couple of weeks.
Tim Stump is president of Stump & Co., a Charlotte, North Carolina-based merger and acquisition specialist.
I would like your comments on the independent wholesale trade showroom industry. These are showrooms not owned by suppliers, but by independent businessmen and women. The showrooms provide a nexus for major suppliers of furniture, lighting, rugs, fabrics and accessories to interior designers and their clients. The value of these showrooms cannot be understated, yet there is limited recognition.
A survey of these showrooms may reveal the serious importance of their role in supporting the interior design community and the suppliers who provide the products. My projection is that it is a hundred-billion-dollar industry.