09/04/2024
Kichler & Progress Lighting to be Under Kingswood Capital Management Control – What Does It Mean for the Residential Lighting Sector?
When news broke this morning that Livonia, Mich.-based Masco Corp. sold off Cleveland-based Kichler – widely regarded to be one of the largest decorative residential lighting manufacturers in the U.S. that it acquired with great fanfare in 2018 – there wasn’t a lot of shock in the industry at the announcement…until the revelation that the acquirer was an affiliate of the same private equity firm that purchased the formidably sized residential lighting manufacturer Progress Lighting not even one year ago.
When Masco purchased Kichler six years ago (which included Kichler’s elan brand), it joined the mega corp’s cadre of “decorative architectural products, which included Behr paint brands and Liberty Hardware, among others. Masco also is the parent to widely recognized home-related brands such as Delta faucet, German shower product manufacturer Hansgrohe, plus Newport Brass and Ginger kitchen and bath accessories.
Kingswood Capital Management’s portfolio is, comparably speaking, not as cohesive when it comes to the home product market. On its website, the Los Angeles-based private equity firm describes its specialty as “[partnering] with leading companies in the middle market which stand to benefit from our capital and extensive operating resources. We embrace complexity and are well-positioned to support businesses at inflection points in their development to drive durable value.”
Kingswood Capital notes its focus areas as: Services (business, government, and healthcare)
Consumer (services, products and retail), Industrial, and Distribution. Its “deal characteristics” are detailed as having an investment size of $50M-150M+ (or greater with co-invest) with at least $100M of revenue; positive, negative or breakeven EBITDA. Its portfolio consists of companies as diverse as: the G Fuel energy drink brand focused on the gamer community; Lind Marine, which provides dredging, barge and tug services throughout the San Francisco Bay and Delta, and the Sacramento and San Joaquin Rivers; Mountain Equipment Company (MEC), considered to be Canada’s go-to retailer for outdoor gear, expert advice, and open-air inspiration; California-based grocer The Save Mart Companies, which operates approximately 200 Save Mart, Lucky California, and FoodMaxx stores in the California Central Valley and Northern Nevada; Turbo Wholesale Tires, a designer, supplier, and wholesaler of proprietary and third-party branded tires; PATCO Products, a leader in developing and manufacturing emulsifiers; and Obsession Holdings, one of the largest retailers of authentic designer and proprietary fragrances and related accessories under the Fragrance Outlet and Perfumania banners, among other companies.
With the exception of World Market® – a national specialty retailer of home furniture, décor, curtains, rugs, gifts, apparel, coffee, wine, craft beer, and food products – Kingswood Capital did not appear to have any recognizable brands in the home improvement or home building sector until news of its acquisition of Progress Lighting became known at the end of December/early January.
Kichler changes
After the Masco acquisition, there were noticeable changes at Kichler — not the least of which involved personnel and company culture, especially since Kichler had been a family-owned business spanning multiple generations.
Under Masco, Kichler moved out of the permanent trade showroom at the Dallas Market Center where it has been a mainstay for more than 30 years, and into a separate showroom in a nearby design district where it lost the convenience of showroom buyer traffic during the twice-yearly Lightovation shows.
While a private shuttle transported Market visitors from the Dallas Market Center to the new Kichler showroom since 2021, the transportation process requires more time from a scheduling perspective for lighting buyers attending the Dallas Total Home + Gift Market and Lightovation to carve into their show schedule. The move – which required a considerable investment in renovation, including modifying the use of a second floor – was made in effort to tap into the interior design and architectural communities in the Dallas area on a more regular basis than during trade shows.
Kichler made other significant changes under Masco: a post-pandemic shift to a hybrid work arrangement for its employees, which led to a relocation for its headquarters to a smaller facility. Its long-time Ohio warehouse was also closed and a new distribution model and facility set up in Eastern Pennsylvania.
In the announcement of its definitive agreement to sell Kichler, Masco Corp. revealed the purchase price to be approximately $125 million.
Keith Allman, President & CEO, Masco, said, “Under Masco’s ownership, Kichler has undergone a series of transformations which have generated efficiencies within its business, improved customer service, and enabled greater product innovation. Going forward, we believe this business has greater potential to realize future growth as part of an organization with a more concerted focus on lighting. We are confident this transaction will be mutually beneficial to Kichler Lighting and Kingswood Capital Management, while simultaneously driving greater value for Masco shareholders.”
What now?
When the Masco-Kingswood Capital deal is finalized, Ohio-based Kichler Lighting will presumably join the portfolio that includes its long-time competitor Progress Lighting.
Reaction among the residential lighting distributors that I have heard from range from shock, sadness, and confusion. Shock is self-explanatory, but the sadness comes from industry veterans who mourn the loss of the “family” businesses that shaped the decorative side of the residential lighting community for so many decades. The confusion stems from the concern that two well-established brands that play in the same markets (i.e. home builders and those specializing in home renovation) will seem redundant.
Like many other industries, private equity acquisitions have become part of the residential lighting landscape. Some private equity firms have managed their lighting companies very well and created a win-win environment. Others, however, struggle to understand that the decorative residential lighting community moves slowly — returns on investment often don’t happen as quickly as investors hope and count on.
Obviously, the Kichler acquisition news is too fresh for anyone to predict exactly how it will play out regarding brand alignment, personnel changes, and market strategy.
This is a developing story, with news added as it becomes available.
