The story of Sleep Country’s acquisition of Endy
The top executives of Sleep Country Canada were waiting for an Uber after a five-hour business dinner in downtown Toronto this August, when they knew they were close to a deal.
“These are the guys,” Stewart Schaefer, Sleep Country’s chief business development officer, told his colleagues, gesturing to the two 30-something business partners walking away from them.
The pair were the founders of Endy — CEO Mike Gettis and chairman Rajen Ruparell — high school friends from Calgary who had turned their bed-in-a-box outfit into a major Canadian retailer.
For the Endy founders, the dinner marked a turning point as well: After months of fielding unattractive acquisition and investment offers from other players, they knew they’d found their buyer.
“That was the moment,” Ruparell recalled.
On Thursday, about three months after that dinner, the deal was announced: Sleep Country would buy Endy for $88.7 million — $63.7 million in cash when the deal closes next month and another $25 million in 2021, if Endy hits growth and profitability targets.
Sleep Country’s acquisition will see the legacy brand expand its reach into younger demographics, pushing further into the online bed-in-a-box segment that has disrupted the traditional mattress industry. But, according to both sides, the deal might not have happened if not for that dinner at La Palma, an upscale Italian restaurant, in August.
Schaefer — who sold his own business, Dormez-vows?, to Sleep Country in 2005 — had known the Endy founders since they introduced themselves after starting their company in 2015. “They were nobody yet,” Schaefer said.
By 2017, Endy’s success had started to convince Schaefer and Sleep Country to reassess their own operations. They launched their own bed-in-a-box brand last year, and a website with an e-commerce function. “We owe (Ruparell) and his team a lot of the credit,” Schaefer said.
This spring, Schaefer’s calls with Ruparell progressed from “two mattress geeks talking about the industry ” to talks on a potential acquisition. In midsummer, Schaefer said he toured Endy’s office.
By August, Ruparell and Gettis were ready to sit down formally with the Sleep Country executive team. After unsuccessful discussions with other potential buyers and investors, the two were clear on their terms: They wanted to stay separate from whatever brand bought them and they wanted to keep production in Canada.
At La Palma, the two sat across from Sleep Country CEO David Friesema. Over tuna and steak, the group talked for four hours before actually broaching the terms of the deal. Friesema was adamant Endy would stay separate. And in subsequent discussions, the decision to keep Endy products out of Sleep Country stores took “10 seconds.”
“It’s very rare that a company is going to look at acquiring your company but then still be excited about you remaining independent,” said Gettis, who will remain Endy’s CEO after the deal closes.
Sleep Country senior management will sit on an advisory board, which Ruparell will chair.
Analysts and retail consultants saw the move as an attempt at increasing its market share after losing a major competitor in the Sears bankruptcy. Financial Post