Recent news that private equity firm Blackford Capital has acquired LTD Brands, which includes Patio Productions and Harmonia Living, shouldn’t come as a total surprise.
LTD is the third addition to Blackford’s Patio Portfolio in the past year, joining Artificial Turf Supply and Starfire Direct as the company aims to evolve the platform into a one-stop shop for outdoor living.
Mostly through mergers and acquisitions, the casual industry has seen and is going to be seeing a lot of news like this over the next few years.
In fact, over the past three years, several significant acquisitions have consolidated the industry — like Hearth and Home buying The Outdoor Greatroom Co., Best Buy acquiring Yardbird, Watson’s buying Allstate Home Leisure, and Plank & Hide acquiring 300 South Main.
For this reason, it’s important to understand that consolidation will change the casual industry by creating competition. If this sounds like a call for doomsday, consider a few things:
- It’s not always bad to be purchased by private equity. These firms bring invaluable resources and cash to the table that can help any savvy business grow. The catch? The products need to be consistent with how they were pre-acquisition and the management team needs to know what they’re doing. One of the worst things they can do is cheap out on materials just to save a buck — and I know plenty of retailers in the industry who agree.
If most private equity firms would get out of their own way, everyone would make more money. That statement may seem ironic because most people believe private equity firms are only about making money. But because they aren’t in touch with the industry and their buyers, they end up losing customers through shoddy craftsmanship, cheaper materials and inexperienced management. - Consolidation in business is natural. Whether it’s to create efficiencies or gain expertise in a category at a rapid pace, businesses in nearly every industry consolidate for one reason or another. The reason it matters so much in the casual industry is because of the shrinking amount of specialty retail stores.
With full-line stores getting into the category and smaller stores closing or selling, wouldn’t it be easier for full-line stores to buy these outdoor specialty shops — which come with educated employees — and enter the category that way? That’s what Hooker did when it bought Sunset West, and going forward, other companies may find this as the path of least resistance. - There’s more consolidation to come. Over the next five years, I predict that consolidation will continue in the industry as the outdoor category continues to be popular. If it hasn’t already, casual furniture will become a category as regular as case goods or sofas to some full-line manufacturers, and retailers who don’t carry outdoor will realize the giant hole in their product mix. And that’s a good thing for the entire category.
It will be interesting to see over the next few years how the industry changes as more companies merge and take new approaches to the casual category. With more consolidation comes more competition, which is healthy for any industry, but it will make it more critical than ever to stand out.
