Herman Miller’s $1.8 billion acquisition of Knoll Inc. two weeks ago sent shockwaves through the commercial furniture industry. The No. 2 largest company acquired No. 5, to now become No. 1 in the business office/contract world. This transaction is the melding of a $2.5 billion revenue company with a $1.4 billion company, to surpass behemoth Steelcase, which has annual revenues over $3 billion.
Office and commercial furnishings have historically been separated from home furnishings, but this deal will accelerate the blurring of the lines into the “resi-mercial” world. Is home office furniture from home furnishings manufacturers or the office players? How about that awesome C-suite sofa? Did it come from Steelcase or Hancock & Moore?
A deeper unpacking of these two companies shows an even larger residential story: The combined residential revenues of these companies is nearly $1 billion, which would place them third on the Furniture Today Top 25 list, behind only Ashley and La-Z-Boy, and ahead of Ethan Allen and Hooker. Wow. This is a transaction that the entire residential home furniture industry should be watching very closely.
Herman Miller has been a consistent player in home furnishings, with its early adoption of e-commerce and its Design Within Reach retail stores. It has very strong relationships in the A&D community, which can access their products for all types of commercial, residential and hospitality venues. Via acquisition, it also owns Hay (Scandinavian home furnishings www.hayfurniture.com). Knoll had also been actively pursuing the A&D community for years and via acquisition now boasts Muuto (European casual seating www.muuto.com ) and Fully (DTC home office furniture www.fully.com).
So what impact will this deal have going forward? We believe these two companies will now push harder into residential furnishings with their legacy existing assets, new ones developed internally, as well as via acquisition. Contract/commercial furniture companies historically sell through dealers/distributors, but increasingly will be direct to enterprises and consumers via e-commerce, retail stores, third-party resellers/e-tailers.
Other major contract/commercial players are watching this trend carefully, and we expect Steelcase, Haworth, HNI, Global and Kimball to make moves towards the residential world. Kimball’s recent acquisition of Poppin (www.poppin.com) and HNI’s acquisition of Design Public Group (https://www.designpublic.com/) highlights the growing importance of the e-commerce channel. Haworth’s ownership of European brand Poltrona Frau would suggest a keen interest in higher end residential goods as well.
So, we are watching these events closely. Are you?