By now, if you are in the mattress industry you know that Mattress Firm (MF) has announced their purchase of Sleepy’s for an estimated $780 million which equates to about $742,000 a store. This will give Mattress Firm a total of 3,500 stores delivering approximately $3.6 billion in revenue. Wow.

If you have been listening to Steve Stagner the CEO of Mattress Firm, you know that they have been rolling up some of the best retailers in the country hoping to create the first real national sleep shop.  Well…they did it. This is a huge accomplishment for the Mattress Firm group and one I hope they take a few minutes to enjoy because they have a huge task in front of them. So what does this mean for everyone? Here are a few observations:

• In the past the bedding producers have always had the ultimate leverage because they were the biggest companies in the industry. Not anymore. Serta/Simmons and Tempur/Sealy are going to have to rethink how they deal with these guys. 
• My guess is that Mattress Firm is going to be able to gain even more of an advantage over other mattress retailers out there with more exclusives, most favored nation pricing, and whatever else they are asking for. This doesn’t mean that other bedding retailers can’t compete, but MF will have an edge that they didn’t have before if they push hard enough.
• Suppliers currently selling to Sleepy’s are likely pondering their long term fate if they are not also selling to MF. Assortments will shift and some will suffer the fate of consolidation. Others will find a way to create value and be part of things going forward.
• Now that the big are getting bigger, the local/regional players should be getting even more attention from producers out there. (This has been happening over the last few years and will likely get even more intense now.) If you are not selling to MF then the local relationship means even more if you are looking to develop your business.
• MF is so big now that there are not that many players out there that can actually service them sufficiently from coast to coast. If MF isn’t happy with what they are getting from the big guys, it makes you wonder if they will start sourcing things on a regional basis.
  

MF is going to have to be careful navigating the clash of cultures. This is not their first time acquiring another sleep shop chain so they definitely have some experience in how to integrate, but this one is going to be their biggest challenge yet. Sleep Train for instance is a large company with great leadership and a VERY strong culture but MF and Sleep Train shared many core values, even if they achieved the results in a different way. Sleepy’s has accomplished a lot over the years so their results are also impressive, but the culture is significantly different than what MF has created. When I say that I don’t mean that one is better than the other, they are just very different and I think that this union will be a bigger challenge.

I talked to Steve Stagner yesterday and he is confident in the deal and the value it is going to deliver to his shareholders. “We have been marching  towards a coast to coast presence for a while now and we have finally made it happen. It is an exciting time.” When I congratulated him on the accomplishment he said “it is all because of my people” and there is no doubt he believes that. He better, because he is going to need them now more than ever to make this thing work!

PS In full disclosure I have known Steve Stagner and we have been friends since grade school, my brother and father were both equity partners with Steve in the MF Atlanta franchise, and I have many friends working at MF corporate so I am biased in how I look at this acquisition. I know that they have a lot of talent working there and I am very happy for them. To all Mattress Firm AND Sleepy’s employees I say congratulations!