Dear Stephen,
I work for a medium-size contract furniture manufacturer that produces well-designed products that are part of making an office complete. Some furniture but mostly ancillary products like whiteboards and keyboard arms - things like that. The same family has owned the company for over fifty years. We have a limited sales force, there are four regional sales managers like myself that cover the country and we use mostly independent reps to sell the product through furniture dealers. My job is to hire, train and manage the IR’s and I do have one or two direct reps that complement the independent reps and work with the A&D communities in major markets like New York and San Francisco. So, back to my question. A big PE firm recently bought our company and within six months they’ve made a lot of changes to executive management. A new CEO from outside of the industry, a lot more accountability. I’m troubled by all of this in part because I’m now dealing with a lot of people who do not know our industry. So far, I feel that my job is safe, and they’ve kept the bones of the original company, but I’m just not sure that I feel comfortable with the direction that we’re going in. I’m used to a predictable routine in a family business that values the quality of life, not just the bottom line to increase the value of the company so the new investors can flip us and make a profit. Do I stay or do I go?
Conflicted About P.E.
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Dear C.A.P.E.,
Private equity companies are the biggest of saviors in our small little-contract furniture industry. More and more P.E. companies are recognizing the value of buying manufacturing companies - mostly where the product is made in America, where the brand is strong, and the product is distributed by loyal dealers. In some cases, these furniture manufacturers also have OEM market share as well. This is happening both in the contract furniture industry as well as in the home furnishings area with residential furniture. When a private equity company acquires a small to medium size company I suddenly get a plethora of calls and resumes from business and personal friends who work at some of these companies or just candidates thinking they should make a quick change because they are in fear for their job. Salespeople and executives who work for these companies fail to recognize that if a private equity company invests in their company or purchases it outright, it’s a compliment to the brand and the company where they’ve been working. Yes – these investment bankers are primarily from “outside” of our industry. Big deal! We’re talking about office furniture, not brain surgery. It’s important that our industry attracts a generation of new leaders with fresh perspectives on how to run a profitable business. Some of these private equity management hires can do just that. A little reality check for every letter I get from someone complaining about their company being acquired by PE or about having a new boss from “outside the industry”: get over it, it beats your company going bankrupt! Which is a very real alternative.
Let’s face it, many of these smaller manufacturers are family businesses with little to no succession planning. Many have third or fourth-generation family members with no interest in what their grandparents or great-grandparents created. It’s better for you and your co-workers that they sell out to smart men and women who want to make the company grow and become more successful. I rarely see a wholesale change in the field sales area.
If your company wasn’t bought by private equity, chances are you would be bought by one of the major manufacturers who are also on the acquisition trail, and you would have the same complaints. Why? Because people like to complain more than they like to adjust to change and get back to work. Field sales managers and people like yourself should be concentrating on your customers and should be more willing to adjust to the new changes (and new resources) that your company may have.
Last but not least, here is a final fact that may make you feel better about your job and job security. Interestingly enough, as far as your company or most of the manufacturing companies in our industry I have seen acquired over the past 5 years, very few of these companies are being flipped or rapidly sold off. Interesting, since part of the goal of buying these companies is to grow the company’s revenue and profits and sell them again. So far, I have rarely seen that.
I have a feeling that your job is secure for a long, long time.
Sincerely yours,
Stephen Viscusi, Executive Recruiter / Author