In the past century, Grand Rapids, Michigan-based Knape & Vogt has changed little since it was founded in 1898 by John Knape. Since that time the company has been controlled by Knape’s descendants, and has retained a small-company feel while maintaining a big presence in its market.
Today the company is the world’s leading designer, manufacturer and distributor of shelving systems, drawer slides and other storage-related products for the office and furniture industries. The company also produces kitchen accessories. For the trailing 12 months ending March 31, the company reported revenue of $164.9 million (€128.8 million) and operating income of $11.8 million. The company employs about 600 people.
When Knape & Vogt first hired financial advisor W.Y. Campbell to evaluate a possible sale of the company, a block of Knape family members led by Dutmers’ uncle, Herb Knape, led a fierce struggle against the idea. Herb Knape, a former board member, wrote a scathing letter to the entire Knape clan denouncing the effort to sell, as well as Dutmers’ leadership. The letter was eventually obtained by The Grand Rapids Press and the issue became very public very quickly.
“We have all heard about the companies that have sold out in recent years where the brokers, investment bankers and top management made out like bandits, while the employees and stockholders got screwed,” the letter read. “Is this what we want for our legacy?”
The vote this week to sell the company to Wind Point Partners for $19 a share, totaling $106 million in cash, was reportedly very close. Few were able to predict what would happen beforehand. A bitter family feud wasn’t all that Dutmers had to overcome to close this sale. According to SEC filings, the sale has run into hurdles along the way, with multiple interested parties eventually abandoning their interest in the face of some warning signs for the company. SEC filings show that all 15 of the initial expressions of interest had valuation ranges exceeding $19 a share, but all of those parties declined to continue with the process because of concerns over the company operating in both the drawer slides and kitchen accessories sectors and a fear that low-priced Asian competitors would hurt the company in the long run.
“What the other buyers struggled with, that we didn’t as much, was the fact that the company, like a lot of manufacturers, is facing challenges from lower cost competitors in different parts of the world,” Chaudhary said. “The chairman, CEO and VP Operations we brought in all had a significant amount of experience in dealing with those challenges as well as improving the efficiency in exiting opportunities, so we felt comfortable with the company going forward.”
Though he admits the family turmoil did present a significant obstacle to closing the deal, Chaudhary says he is confident that the dissenting family members will eventually be comfortable with the offering price and the change in leadership.
“There were economic as well as personal motivations,” Chaudhary says of the conflict. “It was a family situation, and there were a set of folks that just didn’t want to sell because they wanted to preserve the family business. You can’t fault them for feeling that way. But the vast majority of the board members and shareholders felt that the value we provided was compelling.”