Private equity, positive or negative for industry?
David Perry, Executive Editor -- Furniture Today, March 10, 2008
I hear a lot of private equity bashing when I make my rounds in the industry. Thus, I was more than a little surprised when I recently asked 19 producers to give me their thoughts on the presence of private equity players in the mattress industry.
Here's a quick summary of their responses to my question: Has the entry of private-equity firms in the bedding business been a positive or a negative?
Sealy CEO Dave McIlquham: "Very positive."
Simmons CEO Charlie Eitel: "Very good for both manufacturers and retailers."
Serta President Bob Sherman: "A positive development."
Spring Air CEO Bob Hellyer: "Both, which could be said for any ownership structure."
Therapedic CEO Gerry Borreggine: "I don't see that it's either helped or hurt the industry as a whole."
Comfort Solutions President Dave Roberts: "I haven't seen anything that is negative."
It wasn't until I moved out of the ranks of the Top 10 producers that I got more negative comments:
Englander President Kevin Toman: "I think overall the private equity movement has been a detriment to the industry."
Gold Bond CEO Bob Naboicheck: "Private equity is good for stockholders, but no one else, period."
Carolina Mattress Guild President Neal Grigg: "It will be a detriment to the long-term growth of the industry."
So where does this leave us?
First, a couple of caveats. The industry's largest players are working with private equity players, so they have first-hand experience. On the other hand, it has been suggested to me that their association with private equity firms makes them less likely to be critical. You know: Don't bite the hand that feeds you.
And it is interesting that it is executives at smaller companies that don't have private equity owners who tended to be more negative in their comments to me. They cited several serious problems with private equity. While acknowledging that there is a sophistication that comes with private equity companies, Toman listed these negatives: "National advertising has been cut back, they have cut back on services to cut debt, and plants have been closed and jobs have been lost."
Added Naboicheck: "The problem with this (private equity) model is that it is about short-term results, not long-term value."
But whatever you think about the emergence of private equity on the mattress scene, there is a basic reality that we must all accept: Private equity is a major force in our industry. I don't believe we are going to put that genie (or devil, depending on your point of view) back in the bottle.
Contact David Perry at dperry@reedbusiness.com
