Warren — The sale of Art Van Furniture to a Boston-based private equity firm could help the Warren-based retail giant grow, experts say, without necessarily sacrificing a long tradition of philanthropy in Detroit and beyond.
“It’s like if I would buy your car, I could put a supercharger in it,” said David Brophy, director of the office for the study of private equity finance at the University of Michigan. “They don’t buy it to do anything but crank it up and improve it in a positive way.”
Art Van Elslander, founder of Art Van Furniture, on Wednesday announced plans to sell his 58-year-old Warren-based company next month to Thomas H. Lee Partners, a private equity firm based in Boston that has been around since 1974.
“The heartbeat of any organization is its people,” Van Elslander said in a news release. “I am proud of Art Van Furniture’s history and what we have accomplished.
“The time for an ownership transition is right and the opportunity presented itself. There is still much I want to do, and I feel confident knowing the company and its people will be in the very best of hands for continued growth and success.”
Van Elslander won’t have a role in the company once the deal closes, a company spokesperson said. Current Art Van CEO Kim Yost will work with the private firm to “enhance organizational growth and the brand’s plans for the future.” Van Elslander’s son, Gary Van Elslander, will continue to be Art Van Furniture’s president. His other son, David Van Elslander, will be president of Art Van PureSleep.
Company leadership reached an agreement to sell to Thomas H. Lee Partners as the “next chapter in the company’s impressive growth story and continued evolution,” according to a news release.
Art Van’s rich philanthropic heritage is not expected to change: the company sponsors America’s Thanksgiving Day Parade in Detroit. In 2009, the company started the Art Van Charity Challenge, which has awarded millions to Michigan charities, including Cass Community Social Services and the Gleaners Community Food Bank of Southeastern Michigan.
“Giving back to the communities in which we operate is simply who we are, and that will not change,” Yost said.
Private equity firms assemble pools of investors’ money and use it to buy companies or parts of companies. The goal is to bolster the value of acquisitions, which can often — though not always — culminate in later sales to recoup the increased value.
There are a number of directions the company could head when the private equity firm decides it’s time to exit Art Van, Brophy said.
“Typically, private equity funds want to transition (assets) out of the portfolio,” he said. The firm could break up the company and sell it off in chunks, or the company could be sold to another firm. Art Van also could be bought back from the firm by the company’s management, or be taken public.
“Any and all of these things would be on the table,” Brophy said.
Experts agree the sale to THL Partners will only benefit Art Van.
“Private equity funds like to improve costs, improve the brand, improve the marketing,” Brophy said. “It’s a very positive thing .... They’re one of the top private equity firms. I think (Art Van is) in good hands. This is not a fly-by-night ... this is a very mature fund.”
Charlie Rothstein, founder and senior managing director at Michigan-based private equity firm Beringea, called the deal a “really great feel-good story for our community and for the business. THL Partners really have a reputation of stability.
“It’s good news for the state (and) workforce,” he said. “This is one of the giants.”
THL has invested in such businesses as 1-800 Contacts, Dunkin’ Brands and Party City. In 1992, the firm scooped up Snapple and Ghirardelli Chocolate, both of which have grown since THL exited the investments. The company also purchased Safelite Glass Corp. in 1996; Houghton Mifflin in 2002, which it has since exited; and iHeartMedia Inc. in 2008, which it still owns.
In a statement, Jeff Swenson, managing director for THL, said the company was honored to partner with Art Van as the company continues to grow.
“Over nearly six decades, the company has continuously realized Mr. Van’s vision and set the standard for excellence in furniture retail in the Midwest,” he said. “We look forward to working with the entire team at Art Van as we continue to aggressively grow this outstanding brand.”
THL Partners and Art Van did not disclose the sale price of the company.
“After thoughtful consideration and strategic evaluation, we determined that Thomas H. Lee Partners is absolutely the right ownership partner for Art Van,” Yost said in a news release. “We are collectively committed to building on Mr. Van’s tremendous legacy as we enter this new chapter of the Art Van Furniture story.”
Van Elslander founded the company in 1959, when he opened his first store on Gratiot in Detroit. Van Elslander is the company’s sole shareholder. The company has 100 stores in five states, and employs over 3,500 people.