The Furniture Company Wanted to Sell Him Its Buildings and Close Down.

Should he buy the company, too?

1 | 2 | 3 NEXT

Rick Detkowski was in the real estate business, and when Kim Beattie walked into his Clarkston Mini Storage facility in April of 2006, real estate is what Beattie wanted to talk about. Beattie was the majority owner of Moon Valley Rustic Furniture. He'd come with an offer to sell Detkowski the buildings that housed the company's operations. Then he was going to sell off Moon Valley's inventory and go out of business.

Detkowski, who owned eight buildings in the same industrial park as Moon Valley, in Clarkston, Michigan, knew the properties well. He quickly figured that he could get the buildings for roughly $500,000 to $1 million below market value. He also knew Moon Valley as a company. His son, Rick Jr., had spent a summer building furniture there. Detkowski himself owned several pieces of Moon Valley furniture; he liked the simplicity and clean lines of the cedar and ponderosa pine pieces. He respected its products and reputation. He thought about the offer, then said, somewhat impulsively, "Tell you what. If you sell me the company operations, too, then I'll buy the properties." Beattie agreed to unload it all for $1.8 million. The various vehicles, machinery, and furniture and raw wood in warehouses were valued at $500,000, roughly their liquidation value.

It was only in the following days, before any papers were signed, that Detkowski began to contemplate what he was getting himself into. "I might have been a little rash," he says. He had never run a furniture business and would be charged with reviving a sagging operation that he says was "about breaking even."

The general outlook for the domestic furniture industry was bleak. Many U.S. factories had shut down, with production shifting to China and Mexico. The U.S. housing boom was showing signs of slowing down, a bad omen for furniture manufacturers--particularly those, like Moon Valley, with heavy exposure to the second-home market. Detkowski's son, who had experience running production lines, urged him to move forward. But his wife and a trusted adviser were uneasy. Detkowski himself debated whether the deal would be worth the onerous financing terms banks were requesting. Should he go with his gut, strap on a fat loan, and attempt to turn Moon Valley around? Or should he take the easy money, flip the real estate, and let Moon Valley die?

Founded in 1928, Moon Valley had a long history in Clarkston, a community just beyond the battered automotive industry bastions of Dearborn, Troy, and Pontiac. The company had built a solid reputation for furniture that lasts for decades. Moon Valley lawn swings are a fixture in backyards around the region. The company was also considered a team player in the tough Michigan economy, purchasing much of its wood raw materials from Michigan foresters.

After making his impulsive offer to Beattie, Detkowski scrambled to perform some due diligence. He spoke to numerous customers and dealers; they all agreed that Moon Valley's product was quite good. He also spoke to Don Brown, Beattie's co-owner at Moon Valley (and also Beattie's brother-in-law). Brown was a high school friend of Detkowski's, and it turned out he hadn't been so eager to close down Moon Valley. Brown was a 40 percent owner and had his hand forced by Beattie. Brown told Detkowski that Moon Valley was well positioned to sell more products in the log cabin homes market, a sector it had not been able to go after for lack of marketing resources. Sales of log houses had been growing steadily, to about $2 billion a year, according to the Log Home Living Institute. The growth was part of a back-to-nature trend as baby boomers built second homes. Detkowski figured that people buying log homes would want furniture to match--furniture like Moon Valley's. Brown said Moon Valley could increase production and distribution of its railings and spindles for log homes to create more year-round stability than the existing product line, which mainly sold during summer months.

Detkowski also saw ample opportunities to improve the company. The factory seemed dirty and disorganized and the equipment outdated. "You walked into a building that was just chaos," he says. "You might have had to move three rows of swing parts to get the chair parts." Moon Valley had rented out part of its parcel to a land-clearing company that subsequently went bankrupt, leaving a massive pile of mulch that needed to be removed.

In Detkowski's ongoing talks with dealers, he found they were delighted with the product, but puzzled as to why Moon Valley didn't expand its lines or come up with more innovative offerings. For example, Moon Valley furniture required a varnish coat yearly, something that customers didn't have time to do. The company hadn't offered a better solution.

1 | 2 | 3 NEXT

Try a RISK-FREE Issue of Inc. Today!

Renew | Contact Us | Current Issue

Select Services