When Frank and Tom Happ were ready to sell Closet Works, the Chicago-based company they had bought and transformed over the prior nine years, business was surging. Amid the COVID-19 pandemic, people had hunkered down to create or improve their home organization systems — including closets, pantries, offices, mudrooms and garages — during the home-buying frenzy.
There quickly proved to be a lot of interest from buyers in the $23-million company, and the father and son ownership team realized they needed additional help. Wipfli Corporate Finance Advisors worked closely with the Happs to highlight the company’s strengths, negotiate with interested parties and hammer out every detail with The Container Store to get all parties to the closing table.
After retiring two times before, Frank Happ was ready to step away from the business for good and knew the brisk pace of home sales and spiking consumer interest in home improvement made 2021 the year to finally make a move.
Getting the sale completed in 2021 was also a key driver for the Happs out of concern for a potential hike in the capital gains and income tax rates for high earners the following year.
Wipfli Corporate Finance created a 50-page book to give a complete rundown of Closet Works’ financial performance, growth potential, market conditions and competitive landscape, among other things. The materials were sent to prospects on a confidential basis, and then meetings were held with around 20 interested parties. The group was whittled down to about half a dozen serious players. In the end, The Container Store’s $21.5 million all-cash deal stood out from the rest.
Although Frank Happ had successfully sold several businesses in his 40+ year career, this was first time they had sold to a publicly traded company. The Happs developed a new appreciation for the legal complexities involved, especially under an increasingly tight deadline and after months of due diligence.
Issues surrounding the lease consent agreement with the manufacturing site presented some last-minute hitches that Wipfli Corporate Finance was able to work through with The Container Store’s CFO on the afternoon of December 30, 2001, the last possible day for the deal to close in the year. Without the guidance provided by Wipfli Corporate Finance, Frank Happ conceded, the transaction might have fallen through if the details weren’t ironed out in time.
Frank Happ was highly satisfied with the way the deal unfolded, and particularly with final terms of the $21.5 million sale, which garnered more than his original expectations. Tom Happ remains with the company as president of the Closet Works subsidiary under the terms of the acquisition. All 120 employees are also expected to stay on with The Container Store, and new manufacturing expansion is expected as demand for Closet Works’ premium products increases.
Frank Happ, former chairman of Closet Works
10%: The Container Store’s share of the $6-billion custom closet market before its acquisition of Closet Works
$20 billion: Size of the total home storage and organization market
$8.5 million: Closet Works annual net sales when Frank Happ purchased the company in 2012
$23 million: Closet Works annual net sales when The Container Store purchased it at the end of 2021
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