we leverage existing partnerships for added
capacity?” he asks.
His concern, particularly with the types
of financial deals taking place today, is that
ownership by outside parties may drive
short-term financial results above long-term partnership needs.
Ultimately, the success of retail environments mergers and acquisitions will come
down to what retailers want from their
suppliers. “Buying companies with different capabilities, materials, etc., only benefits the retailer if the retailer wants to work
with the same company under those scenarios,” Pinkus warns. “Retailers seem to like
to work with smaller, more entrepreneurial
companies—how many will work with a single, sole-source supplier across the country?”
Lozier’s President and CEO Sheri Andrews
believes many will. “Retailers are also consolidating in some ways, and they have
fewer people to do everything they need to
do,” she says. “Those that are able to provide
more will be the winners in the end.”
What to expect
Neither Pinkus nor Merriman anticipates
a return to the industry roll-ups of the
1990s, although both expect mergers and
acquisitions activity in the industry to continue—for now. “We don’t know when the
next recession will hit. Those that have
taken the opportunity to sell before then
will be happy and those that didn’t, won’t
be,” Pinkus says. Their outlook:
1Expect more deals in the short-term. Multiples across the manufacturing
industry are higher than they’ve been since
before 2008. While store fixture industry
multiples don’t necessarily match those of
general manufacturing, Pinkus notes that
they are higher than most owner/entrepre-neurs have seen for years, and likely higher
than they may be in the future. So expect
to see more sales of companies owned by
aging entrepreneurs and others looking
to exit the industry. Available investment
money also will result in more companies
2Acquisitions will slow when interest rates go up.
As long as interest rates stay low and
retail continues to grow, private-equity
firms will show interest in retail environments suppliers. “Once interest rates go up,
this phase will be over,” Merriman predicts.
3Technology integration offers opportunities for growth.
As retailers seek fixtures with integrated
technology for customer interaction, fixture
manufacturers will need to either develop
their own technological solutions or partner with tech firms. “Over the next four to
six years, this may represent an opportunity
for more acquisitions, joint venture relationships, or partnerships,” Pinkus says.
Tracy Dillon, former editor
of Retail Environments, has
covered retail design issues
for over two decades.