As home improvement spending shows signs of resilience, Live Ventures Incorporated announced its acquisition of Flooring Liquidators, Inc. for $84 million, financed via a combination of cash, debt, and stock. The California-based target provides “floor, cabinets, countertops, and installation services in California and Nevada, operating 20 warehouse-format stores and a design center,” according to the companies’ joint press release. “Over the years, the company established a strong reputation for innovation, efficiency and service in the home renovation and improvement market.”
According to Matterhorn’s M&A database, which harnesses both AI and attorneys to digest the granular deal points of publicly announced transactions, the securities purchase agreement includes an indemnity cap of $7.5 million and lacks a “no shop” provision that would bar Flooring Liquidators from soliciting offers from competing, potential acquirers. No Shop provisions have grown increasingly standard: while just 6.49% of deals filed over the last 12 months forgo no shops, that has plummeted from the historical average: approximately 25% of deals filed from 2007-2021 lack no shops.
No Shop Provision: Last 12 Months
No Shop Provision: 2007-2022
The deal arrives as the remodeling activity that drives Floor Liquadtors’ revenues is begun to slow. The Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University predicts, “a steep deceleration in annual gains of home renovation and maintenance spending from 16.3 percent at the close of 2022 to just 2.6 percent by year-end 2023.”
The COVID-19 pandemic ignited a remodeling boom. Shutdowns meant that people were not only at home more, but also forced to use their homes in different ways than before – namely for work, teaching children, and hosting gatherings. At the same time, many households found themselves with additional cash on hand as they refrained from travel, eating out, and other in person entertainment outside the home. They used this cash, along with access to loans with historically low interest rates, to remodel their homes to suit their emerging needs.
This lead to a building boom with ripple effects across the U.S. economy. But as interest rates have risen and people have returned to more normal activities outside the home, their appetite for home improvement has moderated. According to Carlos Martín, Project Director of the Remodeling Futures Program at the Center, “Slowdowns in existing home sales, house price appreciation, and mortgage refinancing activity coupled with growing concerns for a broader economic recession will cool home remodeling activity this year. Homeowners are likely to pull back on high-end discretionary projects and instead focus their spending on necessary replacements and smaller projects in the immediate future.”
But the sector has shown surprising resilience. Although growth will not match the frantic spending growth of 23.8% during the two years of 2020-2021, remodeling spending has not contracted. It continues to grow, just at a more conservative pace. Along the same lines, the Association of Builders and Contractors projects both construction spending and employment will continue to growth despite economic headwinds.
Live Ventures, “a diversified holding company with a strategic focus on value-oriented acquisitions of domestic middle-market companies,” hopes to capitalize on this continued growth. Live Ventures is advised by K&L Gates LLP and Floor Liquidators is advised by Berliner Cohen LLP.