Buying a company—and telling the world about it—comes with a specific etiquette. Acquisition deals are notoriously dramatic for all involved, full of late-night number crunching, last-minute cold feet, and a rush of countless highs and lows. But the press release announcing the deal is always neat and tidy, full of sunny quotes and usually capped off with the words “The price was not disclosed.”
The phrase is a funny one (the passive voice politely obscures who exactly is choosing not to disclose the information), meant to protect buyer and seller from nosy questions about how much cash changed hands. It’s characteristic of the decorum around acquisitions: Once the drama of the deal is over, both parties have every reason to put it behind them and move on. They don’t have to talk about the messy stuff, so they don’t.
Which isn’t to say that companies tell you nothing—but the details they do convey often come indirectly. Another phrase that’s been popping up in recent acquisition press releases is a variation of the slightly mysterious line “Company X has acquired certain assets of Company Y.” This particular combination of words usually accompanies a kind of deal that feels increasingly common in the design industry, where a company’s brand name and intellectual property are isolated and sold.
In the past year or so, brands like Bellacor, Bed Bath & Beyond, and Mitchell Gold + Bob Williams were all purchased via some version of this process. Before that, it was Interior Define, and before that, Kravet purchased Donghia’s IP out of bankruptcy and relaunched it anew. There will be more to come.
How do these deals work, and why do they matter for the design industry?
When you buy a company, what do you get? We tend to think of companies as complete units, from the logo to the bank account to the fabric sitting in a storage facility, all glued together by the uniform commercial code and common purpose. In the best of times, that’s the case. And profitable, thriving businesses are usually sold more or less whole.
But when companies fall behind on their debts and struggle to make payroll and rent—when they become “distressed”—often the only way forward is to find a buyer. There’s a catch: Buyers don’t want to purchase a company’s unpaid bills. So the distressed company will file for bankruptcy, or a bankruptcy-like process called an ABC (assignment for the benefit of creditors) in order to legally shed its debt.
In the process, the company becomes unglued, and buyers can bid for its individual components, from unsold product to keyboards and office coffee mugs. None of it carries the burden of the original company’s debt.
That dissolution process is common—it happens every day. And while it’s never the happiest occasion, it works. The money raised in the auction goes to pay off creditors, and the buyers get the freedom to start fresh, unburdened by debt. Especially in situations where physical property is being sold off, no one raises an eyebrow (it would seem odd if a company’s debt followed its printers and staplers from one office to another).
Things can get weirder when the brand itself is detached from the company and sold in the same process. In these situations, its intellectual property (ranging from the name of the company to logos to product designs) is bundled together and sold to a new owner. These deals certainly can go smoothly, but they can also lead to confusing—and fraught—situations.
In some cases, brands pass from owner to owner over a number of years, becoming totally disassociated with the original people and products that made them famous. Take Broyhill and Henredon, two once-iconic names in American-made furniture. They’re still in circulation, now slapped on the side of imported big-box furniture, largely valued for their ability to conjure a faint glimmer of recognition—That sounds familiar, I think?—among casual shoppers.
In other scenarios, the handoff is so quick and total that it creates a different kind of disorientation. A company falls into distress, liquidates, and sells the brand name to a buyer, who restarts the company as a legally unique, but near-identical enterprise. From the outside, casual observers might not notice that anything has changed. On the inside, everything has.
Employees, some of whom might not have known their employer was struggling, are told that their company is folding, but a new one with the same name is springing up immediately. Some are offered jobs; others aren’t. Vendors are confronted by new partners, looking to renegotiate long-standing deals. And customers, waiting for orders to arrive from a now-defunct company, are surprised to find that a doppelgänger business has suddenly sprung up—one that, legally, doesn’t owe them anything.
When these deals get messy, they can feel like lose-lose scenarios from an ethics textbook, “prisoner’s dilemmas” where everyone is trying to make the right decisions but nobody wins. Though economically rational—creditors are more likely to claw back their money when a new buyer comes in—the results still feel unfair. Many creditors can accept when a company goes out of business. Something about an identical, debt-free brand springing up in its place tends to drive people crazy.
The drama around Havenly’s late-2022 acquisition of Interior Define was a case in point. For months, thousands of the brand’s customers had remained in the dark, their orders long delayed. Behind the scenes, the brand had hit a cash crunch and was stumbling toward liquidation. At the end of the year, Havenly swooped in and, after a quick ABC, purchased the Interior Define brand and relaunched it as a new legal entity with no obligation to its original customers.
Though Havenly promised to—and ultimately did—deliver huge numbers of sofas to Interior Define’s jilted customers anyway, the anger did not immediately subside. Much of it simply carried over, along with a lot of confusion around the complexity of the deal.
Looking back on it two years later, Havenly CEO Lee Mayer doesn’t regret the deal—and says that Interior Define is profitable now. But she recalls the time as high-stress: “There was a tough period for a lot of us on the team. Not just because it was like, Will be able to turn this around? But people were mad—and I got why they were mad! I wanted to fix it.”
“We were working full days, then staying up until two or three in the morning answering emails and trying to figure out where customers’ orders were,” she says, all while seeing the brand get trashed on social media. There was a feeling, Mayer adds, of “no good deed goes unpunished.”
Although these deals reflect bankruptcy laws that have been on the books for decades, they have certainly gotten more common in the design industry in recent years. The simplest reason for that is economic pain. After the wild surge of business during the pandemic, many home companies are quietly struggling to stay solvent as they wait for the housing market to unfreeze. The industry is choppy, and a lot of companies will either choose to sell themselves or be forced to.
Another factor: The flood of venture capital money into the home industry in the 2010s created a lot of unsustainable businesses, propped up by cheap cash. Now that the tide has gone out, many of them are on the auction block.
But there are deeper, more structural reasons why these sales are increasingly common, largely to do with the rise of digital commerce. Thirty years ago, a lot of home brands were basically regional businesses, locked into a geographical area and forced to operate with a lot of hard assets and salaried employees. In an era when companies can easily outsource everything from manufacturing to logistics, sometimes their most valuable assets—from the IP to the customer list to the Instagram password—can be attached to an email.
Having real inventory, real stores and real people all still matter—especially in the home category—but there’s no question that the internet has made brands more portable. In response, the experts who specialize in mergers and acquisitions have gotten good at making the transactions happen seamlessly, where ownership of a brand changes hands without much disruption.
“Time, in a lot of these cases, is the enemy,” says Tim Stump of Stump & Company, an M&A advisory firm that specializes in the home industry. “Especially if the company has stopped operating. As equipment is sitting in a factory and gathering cobwebs and deteriorating, customers are getting impatient with the brand, and it’s losing value too. The quicker you can act, the better.”
But just as the internet has made it easier to buy and sell brands, it has made getting it wrong more risky. Before the ubiquity of social media, jilted customers would struggle to get the word out about their predicament. Now anyone can start a pressure campaign that picks up steam. It’s one thing to shed yourself legally of debt—it’s another to banish the bad vibes in the consumer marketplace.
Would-be corporate buyers are aware of this dynamic, and factor it into their dealmaking. Sometimes, it can almost be simplified into a line item: How much do we have to pay to calm things down? “In addition to the X dollars buyers need to invest in the business to get it up and running, there’s the expense of providing an incentive to win the customers back and regain their trust,” says Lee Helman, an M&A advisor at financial services firm Raymond James.
The make-good effort doesn’t always work, and some customers (and vendors) will have been burned enough to be turned off from a company forever. However, experts say that despite the confusion and anger that can emerge from drama around these deals, it eventually fades. And if the new owner can steady the ship and deliver for customers over time, the company will soon come to be judged on its own merits.
Even the Interior Define drama calmed down after a few months. A Facebook group that sprung up amid the chaos was once filled with furious comments directed at the original company; then, after the deal closed, toward Havenly. Over time, as deliveries began arriving, the tenor of the comments cooled. Eventually the forum became a place for customers to post pictures of their furniture.
“People really like the product,” says Mayer. “At some point, you forget that the sofa was 10 months late and move on with your life.”
