Steelcase Announces Acquisition of Viccarbe Habitat



KEY POINTS
  • Early morning, October 27, 2021, Steelcase issued a press release and issued an attendant 8-K detailing that it has acquired, for cash, all of the capital stock one of its partner companies, Viccarbe, Habitat, S.L. Viccarbe is a Spanish designer of contemporary furniture for high-performance collaborative and social spaces. Viccarbe was founded in Valencia Spain in 2000 and has been a partner company of Steelcase for more than 10 years.
  • The disclosed financial metrics are: (1) Viccarbe annual sales rate is ~€14.5 million ($17 MM); (2) The initial cash acquisition price is €30 MM ($35MM); and (3) there is an earnout potential of €19MM, payable to the sellers, over 5 years, contingent on meeting certain performance targets (presumably revenues and profit), milestones, and continued employment. The release and the company were silent about any past profitability and/or projected profit impact.
  • We suspect that the near-term impact of this acquisition will be small and not material to near-term financial results. Steelcase’s direct purchases from Viccarbe are likely also small, which also suggests that revenue eliminations (intra-company) will be immaterial. Further, we do not believe that Viccarbe owns manufacturing facilities; and accordingly, outsources the production for most of its product. For that reason, we would not be surprised if much of the purchase price will be accounted as goodwill and/or other intangibles.
  • Irrespective, and we encourage our readers to look at Viccarbe’s website (linked above), Viccarbe’s product offering and market reach appears exciting and additive to the Steelcase product portfolio. In addition, by using Steelcase manufacturing and distribution capabilities, the incremental revenues should allow the acquisition to be value-creating.
  • Lastly this announcement catalyzes a thought that as society and companies exit from the pandemic, we may see an increase in merger and acquisition activity. While many larger public companies have been able to strengthen their balance sheets during the pandemic, there are – likely – a population of smaller companies that have not had the access to capital and may not have been as fortunate, notwithstanding the quality of their offering and/or other strategic virtues.
  • The contract furniture market is both concentrated and fragmented. Its larger players typically account for more than 60% of domestic shipments. The balance, however, is fragmented among thousands of other entrepreneurial and smaller companies. That fragmentation increased during the past decade with a movement to residential product, eCommerce, and global styling. To remain abreast of some of those trends, Steelcase developed a veritable alphabet of partner companies (about four dozen by our count). Obviously, not all of these are acquisition candidates, but history in the contract furniture market has shown that partnership/JV companies have periodically become acquisitions of their larger partners.
FINANCIAL SNAPSHOT
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