Private Equity Partnership: The Success of Bestar Inc.
Photo from bestar.ca.
It was nearly two years after selling his door manufacturing business to Masonite International Corp. that entrepreneur Mario Aubé was approached to run a different kind of building products company, furniture maker Bestar Inc.
Lac-Mégantic, Que.-based Bestar, which designs and makes ready-to-assemble (RTA) home and office furniture, was looking for a new leader to help revitalize the company. The family business, founded in 1948 and taken public in 1986, was struggling due to intensifying competition from large-scale furniture makers across North America and the growing imports from China — and investors were getting antsy.
Instead of just running the company, Aubé and a handful of private equity firms, including MB Capital, decided to take Bestar private in late 2014 in a deal valued at $2.7 million. Their plan was to restructure the company, including making improvements to its operations and customer service to better compete with industry rivals. “I’m an operator. That’s what I do,” Aubé says.
Aubé and his team revamped Bestar’s inventory and manufacturing systems in a way that enabled it to deliver its growing list of products — such as desks, tables and its highly popular murphy beds — more quickly to consumers. “It was through a number of little steps …. that we were able to put the focus back on doing everything we can to service the customer,” Aubé says.
Three years after taking the company private and tripling its sales, Bestar attracted Novacap, one of Canada’s most established private-equity firms, to help fund its next stage of growth. “We knew there were huge opportunities to grow the business,” Aubé says of the decision to bring in more private equity backers.
Bestar used the additional private equity funding to realign its strategy, including a focus on the growing online segment of the RTA furniture market. The company invested in new manufacturing equipment to accelerate automation, product design and innovation, as well as making improvements to its production capabilities, logistics and distribution channels. As a result of these changes, and the shift to mostly online sales, Bestar not only saw higher revenues but expanded its gross margin that has helped it to significantly improve its bottom line.
The investments were made at Bestar’s Lac-Mégantic facility, as well as to build a new state-of-the-art fully automated production facility in Sherbrooke, which began operating in 2019. The company also opened a third-party distribution center in Reno, Nevada last year and is working on establishing a second distribution center in the state of Georgia. (About two-thirds of its sales in 2019 were in the U.S., with the remainder coming from Canada).
As a result of the additional investments, Aubé says Bestar is better positioned to meet the ever-evolving demands of online consumers. “[Novacap] is a great partner, both financially and strategically, helping open our eyes to the opportunities out in the market today,” he says.
Earlier this year, Bestar also made its first-ever acquisition, buying Jamestown, N.Y.-based Bush Industries Inc., an American manufacturer of case goods and RTA office and home furniture.
The combined company has about 640 employees (up from 158 in 2017) and is expected to generate a combined CAD $300M in sales in fiscal 2020. The acquisition was financed by Novacap, along with fellow Quebec investors Desjardins Capital and the Fonds de solidarité FTQ. Aubé says the companies share some customers across the North American market and will leverage each other’s strengths to continue to expand. “The main thing we want to keep on growing,” he says.
The newly combined company will be headquartered in Sherbrooke, which Aubé says will help it recruit top talent given its proximity to Montreal. Lac-Mégantic will remain the company’s main operations centre, he says, in part for its proximity to particleboard manufacturing Tafisa, a key source of its raw component, but also because it’s the community where the company was born and grew up over the past 72 years.
As part of a commitment to the community, Bestar has established a strategic partnership with the University of Sherbrooke to offer internships and full-time job opportunities to graduating students. This initiative has helped promote local talent, while helping the company reinforce its design and innovation expertise.
“We’ve invested a lot there throughout the years, and it’s important for us to remain in that community,” Aubé says. “The people have supported us, and the city has supported us throughout all of those years.”