Situation Analysis

In late 2001, Management of StyleCraft Lamps, Inc. (“StyleCraft”) stood at a crossroads. Just eighteen months earlier, the longtime family owned manufacturer of traditional style consumer portable table and floor lamps was sold to Interiors, a publicly traded roll-up. Now, its new parent, Interiors, was on the verge of bankruptcy. Despite achieving steadily increased revenues in the portable lighting niche, Management saw an opportunity to boost sales even more rapidly through entry into related home décor categories such as tabletop accessories and wall décor products. Yet, with the impending reorganization of Interiors, Management knew that StyleCraft would soon be for sale. In order to retain control of the Company’s destiny and that of its employees, Management realized it had to reacquire the business. Doing so meant finding a strategic and capable private equity firm – one that possessed substantial equity capital and offered valuable consultative expertise.

Company Background

Based in Hernando, Mississippi, StyleCraft features the broadest product offering in the mid-priced portable lamp segment, with more than 700 SKUs of traditional-style consumer portable table and floor lamps. StyleCraft lamps are distributed to all major retail channels, including independent retail stores, specialty home décor retailers, mass merchants, home centers, and department stores.

Jimmy Webster, President, and CEO of StyleCraft, founded the Company with his father in 1968. In early 2000, he sold it to Interiors, which had embarked on an aggressive consolidation of home furnishings suppliers. At that time, StyleCraft’s annual sales were about $25 million. When Interiors filed for bankruptcy protection nearly two years later, annual sales had increased to nearly $45 million despite challenging market conditions. Webster still managed the day-to-day operations, and through his association with Interiors, he gained a better understanding of the tabletop accessories and wall décor products categories and their potential for increased sales.

Knowing that the reorganization of Interiors would lead to an auction of StyleCraft, Webster saw an opportunity to buy back the business, regain control of the Company, help to ensure job security for its employees and capitalize on opportunities to transform it into a multi-product enterprise.

Due to its recent growth, Webster recognized that he would not be able to purchase the business by himself without incurring undue personal financial risk, the avoidance of which was precisely why he had sold it in the first place. Consequently, he sought a stable, experienced private equity partner with decades of experience investing in and growing companies that appreciated his vision for StyleCraft and offered the resources necessary to help him achieve that vision.

Finding The Right Private Equity Partner

MCM Capital Partners (MCM) is private equity firm based in Cleveland, Ohio that manages committed capital funds on behalf of institutional investors and high net worth individuals. MCM seeks to invest in growing middle-market companies with revenues between $15 million and $100 million. MCM’s General Partners, which include Mark E. Mansour, James C. Poffenberger III, Steven M. Ross, and Gerard R. Weimann, have more than 30 years of experience leading management-led buyouts, recapitalizations, generational changes in ownership, and the acquisition of corporate divestitures. Working in conjunction with the General Partners to add value to investments is an Advisory Board consisting of prominent current and former corporate executives. This affords portfolio companies a unique opportunity to leverage the expertise and insight of corporate executives who have run multi-billion dollar operations through membership and involvement on their corporate boards.

Since 1992, MCM and its General Partners have been involved in deals representing $500 million in annual revenues. MCM currently has more than $125 million under management and has successfully invested in and grown nearly 20 companies.

Concurrent with Interiors’ forced divestiture program in 2001, MCM’s General Partners had identified the home furnishings field as an area of untapped growth that was ripe for investment. They became aware of StyleCraft through contacts in their extensive deal sourcing network. MCM’s due diligence confirmed that StyleCraft was a solid, consistently performing business with all the necessary elements in place to pursue aggressive expansion. As a result, MCM teamed with Management to purchase the Company. The deal officially closed in October 2001. Terms of the transaction afforded StyleCraft’s Webster and several other executives a 22 percent ownership stake, while the Company itself gained access to MCM’s substantial pool of committed capital, as well as the expertise of its General Partners and Advisory Board.

Implementing Management’s Growth Plan

In forging ahead, MCM left daily operation of StyleCraft to its Management team, and served as a steady financial partner to provide consultative support before, during, and after the Company’s broad expansion. Management first created a new wall décor division and then instituted an identity change to StyleCraft Home Collections in order to better reflect the Company’s repositioning as a broad line home accessories supplier. Poffenberger, MCM’s Managing Director, and General Partner, recalled that transformation: “It was akin to starting a new business. Management brought in highly experienced people including a general manager; it purchased an 80,000 square-foot facility across the street, and it established supply arrangements with foreign vendors that really got the ball rolling.”

“The greatest value we could bring to the process was to back the right management team and encourage it to pursue channels that enabled growth and profitability,” Poffenberger added. “We can suggest certain strategies for enhancing human resources and business development, but once that is in place, it is up to Management to make things happen on a day-to-day basis.”

Exceptional Performance Leads To Early Liquidity

MCM traditionally holds companies within its portfolio for five to seven years. By October 2004, however, StyleCraft’s Management had operated substantially in excess of its plan. “By successfully implementing the first phase of its expansion plan, it increased earnings by nearly 50 percent since its association with MCM began in 2001, and it paid down much of its debt in the process,” said Director and General Partner Steven M. Ross. “Consequently, MCM made a joint decision with StyleCraft Management to monetize its investment to provide a return to its investors, which resulted in the sale of StyleCraft in August 2004.”

Upon completion of the transaction, StyleCraft’s Management team remained with the Company and continued to implement its business plan under the auspices of a new financial partner of its choosing.

Reflecting On A Successful Partnership

Poffenberger cited MCM’s firm support of StyleCraft’s Management team and its vision as a key element in the Company’s continued success. “Jim could have selected any one of a number of groups at the outset, but he felt most comfortable partnering with us,” he said. “He knew we weren’t going to panic if a problem came up, and he knew we had confidence in him and his Management team to execute its business plan.”