Strategy Session

5 Lessons From Home Depot’s Acquisition of

acquisition equity investment investor market share private equity group May 16, 2022

Jay Steinfeld built into a $100 million e-tailer before selling out to Home  Depot. Here are five things that made it a spectacular exit. 

Win The Make vs. Buy Battle 

Companies like Home Depot have a “make or buy” decision when they see a  competitor winning market share. They can opt to buy the competitor or choose to  simply re-create what they have built.  

An acquirer will likely opt to buy your company if you are so dominant in your niche  that recreating what you have built would take too long and cost more than  acquiring it from you. got acquired, in part, because they were a big fish in a small pond. At  more than $100 million in revenue, they were the largest online retailer of blinds in  America by a long shot. Even though Home Depot has close to $90 billion in sales, were outperforming them in their tiny niche and that made  irresistible to Home Depot. 

Run It Like It’s Public 

At the time of the Home Depot acquisition, had 175 employees, yet  Steinfeld had been running the company as if it were public for years. He had put  together a top-drawer management team and taken the unusual step of  assembling an outside board of directors. He had quarterly board meetings with  formal presentation decks, and Steinfeld hired a Big Four firm to complete a full  audit of his financials each year. 

Steinfeld credits this rigorous approach to running a relatively small company as a  major reason Home Depot was interested in and able to close on the  acquisition so quickly. 

Keep Most Of The Equity 

Steinfeld invested $3,000 of his own money into a basic online presence for his  blinds store back in 1993 and grew to more than $100 million in sales  without diluting himself by taking three or four rounds of institutional investment, 

as would be typical of an internet start-up. Steinfeld took a small investment from  friends and family and used bank debt to help him buy distressed companies for  pennies on the dollar. It wasn’t until 2012—almost 20 years after starting the  business—that he accepted his first round of “professional” money from a private  equity firm who wanted to invest more, but Steinfeld refused, only taking enough to  buy out a few of his original investors and pay off some debt. 

Keep Investors Aligned 

One of the reasons Steinfeld accepted an investment from a private equity group  was that he had become misaligned with two of his original investors. The investors  saw the success of and wanted Steinfeld to start declaring regular  dividends. Steinfeld, by contrast, was focused on building a growth company and  needed the cash to fuel his 25% per year growth. After a while, his investor’s  expectations got so far out of whack that Steinfeld opted to buy them out. 

Share The Love 

One of Steinfeld’s best memories is the day he told his employees Home Depot had  acquired Steinfeld had made sure every one of his 175 people had stock options and so stood to gain financially from the sale. Steinfeld  went further and gave each employee $2,000 of his own money to start an  investment account as a personal thank you for all they had done.


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