Strike While the Iron is Lukewarm

Lots of deals in the works these days. Many of them, perhaps most, will never come to fruition. Why? For the same reason that the deals attempted just a few years ago, before the dam broke open, failed: hubris.

At bottom, any business is worth what the highest bidder is willing to pay for it. It likely is worth less than the deal the business turned down yesterday, even less than the deal it turned down a year ago, and far less than the off-shore “partnership” it scoffed at three years ago.

If one is of a mind to cash out, do it. The offers are not likely to grow more robust as the years roll by. There are three choices today for American suppliers: Cash out. Deal yourself in with an off-shore stake. Or don’t deal, and watch the tide carry the business away.

The U.S. home textiles community is blessed — and cursed — by the plethora of family-owned and individually-owned companies. With one or two exceptions, there is no next generation upon whom these businesses will be bestowed.

Sure, there are plenty of hedge funds and other financial types sniffing around the industry. Some suppliers and a couple of retailers have already been acquired by them. But it’s hard to see how the end game there doesn’t wind up as “Tony Soprano Sacks Scatino’s Sports Store.” It’s business.

Today’s reality is that everything is for sale, all the time. A lot of new companies have arrived on the scene, and many are successfully clawing share from the veteran vanguard. (They’re also hiring seasoned talent from the veteran vanguard.)

Consider JCPenney’s Suppliers of the Year roster from this past spring: Extreme Linen, Nostalgia Home Fashions, Victoria Classics, Pem America, and Louis Hornick. Not one of them is a Top 15 supplier. Not one of them cracks the Top 5 in any product category. But each one of them is out there waling away at the shelf space.

Which doesn’t mean two or three of them won’t get to the very top. And in an industry where significant organic growth seems to come on too damn slowly, some of them might make the leap through acquisition.

So, a piece of advice for acquisition targets out there: Strike while the iron is still…lukewarm.