Herman Miller Acquires Knoll - Initial Thoughts
So, yesterday morning, we all woke up to the biggest news story the contract furnishings industry has ever had - at least since the invention of the metal wastebasket by Steelcase in 1912. No doubt, like many of you, my first thought was that it was a left-over April Fools joke that someone had forgotten to post earlier this month. But, no, it's the real thing. Then, coincidently (correlation isn't causation), Steelcase's CEO, Jim Keane, announces his retirement and simultaneously announces the appointment of Sara Armbruster to the position. But that's a story for another day.
Another shock, the combined revenue of Miller and Knoll are ALMOST the exact same as Steelcase (using the last full-year numbers). So who is #1? Do we have a new king? Does anyone care?
So, there are lots of moving pieces to this puzzle to consider. The main question is does 1+1=2? At first glance, many will say yes, but I am not so sure. Miller and Knoll compete with each other, especially in the "museum piece" category. Do you want Eames or Mies? But the combination won't yield any additional benefits to customers, dealers or even shareholders (who are the only people who can afford the museum brands anyway).
Next consider office furniture. They both compete for seating and a bit less so for systems. No gain there. If you're in their camps, you will buy one or the other - not both.
In residential, Miller has DWR, and Knoll has lots of (expensive) residential products to help fill the shelves - which they already do to a small extent. Again, not much gain there. RH (Restoration Hardware) looms large (oh so large as in a market cap of $13.46 billion).
Miller may have a commanding position in seating, though less so lately, leaving Knoll's Formway derived chairs out in the cold. Again, no gain there.
Then there is the dealer situation. They don't share many, so a combination will mean goodbye to many Knoll dealers in lots of markets. What will they do? Move to Teknion and Haworth, of course. But, effectively, there are going to be less dealers around after this.
The only thing not affected is NeoCon, as both companies had moved out of the Mart in the past year. So, mainly a significant gain to those who remain.
Anyway, there is much thinking on this acquisition yet to be done. We have to assume the positives they tout in the PR are pretty much worthless. Saving a couple hundred million in space and employee costs by combining the two companies may benefit shareholders, but who cares about them?
Oh, wait, this is ONLY about shareholders. The purchase doesn't advance design or the curation of both brands' museum pieces (aka antiques) one bit.
So no, my initial opinion is that this is a merger that doesn't add up in any good ways for customers, designers or dealers. And as unions go, most are unsuccessful anyway. This is no rocket, more like a lead balloon. My guess is that no tangible gains whatsoever will come from this acquisition.
The sad truth is that the industry has been left in the dust by shinier, brighter (tech) companies. Steelcase and Miller have long suffered by being run by (boring) numbers guys for most of the past decade. While they turned in so-so results, they failed to innovate much of anything. And when the workplace began to change, they were caught off guard, preferring to purchase residential companies to pump up their sagging numbers. That pretty much holds for Knoll and Haworth as well. When Goldman Sachs engineers a deal like Miller buying Knoll, you automatically know they smelled impatient shareholders looking to make some quick cash. The PR they issued concerning this purchase is almost comical.
Yes, this acquisition is basically a “ho-hum nothing-burger” benefitting nobody in or related to contract furniture. It's a sell-out by Owen and Cogan and an admission that these companies have very little intrinsic value, especially when you consider Slack, an 8-year-old software business communications platform, recently sold to Salesforce for $27 billion, and 83-year-old Knoll went for $1.8 billion.
This transaction is truly a sad ending for Knoll, which has seen no shortage of lousy management and terrible product decisions over the decades. Somewhere the few remaining loyal Knoll A&D followers are crying.
This opinion piece was updated at 9:42 pm Monday night after the author thought he was being too nice to both companies.