Gat Caperton·October 28, 2024

Buying & Building a $60m Furniture Manufacturer | Gat Caperton Interview

Gat Caperton is a 28-year owner-operator of Gat Creek (originally Tom Seely Furniture), a solid wood furniture manufacturer based in Berkeley Springs, West Virginia (pop. 600), which he acquired in January 1996 at age 26-27 after cold-calling the owner following a tip from his father. The deal was structured with ~90% debt: 70% seller financing (interest-only 2 years, then balloon payments), 20% local bank, and 10% equity split 50/50 with his father — a silent partner and former West Virginia governor. Purchase price was roughly $4m at book value against $10m revenue and near-breakeven EBIT of ~$500k. Caperton's thesis was a lean manufacturing turnaround: the plant was operationally chaotic, so he cut lead times from 16 to 8 weeks in year one, freeing $1.5m in cash. The business grew to $14m before China's WTO entry decimated the US wood furniture market (90% to 10% American-made in 15 years), driving revenue below $10m and leaving Caperton paying suppliers in 100+ day cycles for years. He survived through aggressive channel diversification (Room & Board, designers, selective DTC), a successful antidumping lawsuit against China yielding nearly $1m in Byrd Amendment payouts, and a made-in-America/sustainability positioning strategy he helped pioneer. Post-COVID demand surge enabled a $7.2m expansion to 140k sq ft targeting ~$60m capacity, and as of 2024 revenue stands around $30m with 160 employees — a business Caperton describes with the pride of a survivor in a community where the factory is the social fabric.

Deal facts

purchase price: ~$4m (book value / total assets)
multiple: 5.5x EBIT (enterprise value); high multiple of true cash flow given near-breakeven operations
sde ebitda: EBIT ~$500k stated (but balance sheet deteriorating ~$200k/yr; effectively near breakeven)
revenue: $10m at acquisition
financing structure: 70% seller note (interest-only 2 years, balloon payments years 3-5) + 20% local bank + 5% personal equity + 5% family (father as 50/50 equity partner); ~90% debt overall
notes: No SBA; direct-to-seller cold outreach / proprietary deal. Business originally named Tom Seely Furniture, rebranded to Gat Creek. Acquired January 1996. Father (former governor of West Virginia) was silent 50% equity partner. Revenue grew to $14m, then fell below $10m after China competition (2001-2010), recovered and by 2024 at ~$30m. Built to ~$60m capacity target after $7.2m expansion loan (2021-2024) adding 40k sq ft.

Why this business

Caperton grew up in West Virginia and had been exposed to manufacturing businesses while working for Sam Zell's Eagle Industries in Chicago. He wanted to buy a small manufacturing company — before China disrupted the industry, manufacturing seemed like an accessible, exciting sector with real assets. His father tipped him off to Tom Seely, an old-school furniture maker in Berkeley Springs, WV who was doing value-added manufacturing (turning local lumber into finished furniture) unlike most of the state's extraction-based economy. The plant was operationally a mess but the product was good and he saw a clear lean manufacturing turnaround play.

What's working

Lean manufacturing implementation: cut lead times from 16 weeks to 8 weeks in year one, freeing ~$1.5m in cash by halving inventory
Made-in-America and sustainability positioning: helped found the Sustainable Furnishing Council 17 years ago; American-made became a premium differentiator as China dominated the market
Channel diversification: moved from pure independent retailer wholesale to direct partnerships with Room & Board, designer/specifier channels, and selective DTC — getting closer to the end customer
Surviving the antidumping lawsuit: joined John Bassett III's coalition suing China for illegal dumping of wood bedroom furniture; won, received nearly $1m in Byrd Amendment distributions over 10 years (half-million dollar check paid off suppliers), and tariffs slowed the most egregious Chinese competition
CNC / automation investment: giant Gantry CNC machines enable subtractive manufacturing at scale, combining technology for uniform inputs with skilled human assembly for variable work
2021-2024 capacity expansion: borrowed $7.2m, expanded from 100k to 140k sq ft, targeting doubling of capacity to approach $60m revenue
COVID windfall: furniture demand doubled during lockdowns; lead times stretched to 23 weeks but longer wait times paradoxically increased orders

What's hard

China WTO entry (2001) caused the US wood furniture market to flip from 90% American-made to 90% Chinese-made within 15 years, causing devastating deflation and revenue collapse from $14m back below $10m
Expanded facility (to target $30m) right before sales collapsed post-9/11 era; nearly went bankrupt and spent years paying suppliers in 100+ days
Great Recession (2008) hit on top of China disruption; didn't get fully back on feet until 2010
Discovered significant post-acquisition compliance issues: women paid 70 cents on the dollar vs. men; illegal waste burning in fields (the 'burnoff'); no product catalog (photomat prints in family albums)
Two near-death experiences separated by ~15 years — the China disruption of the early 2000s and the debt load from the capacity expansion — required extreme cash management and supplier goodwill each time
Running a manufacturing business in a very small, remote community (Berkeley Springs, WV pop. 600; county 14,000) makes talent and capital access difficult
Antique reproduction product line became obsolete; had to rebrand the business and pivot product design to more contemporary styles

Notable quotes

It was 70% debt seller paper when I bought the business, really 90% debt overall. The play was I thought I could fix the manufacturing and specifically implement lean manufacturing and we did that and it went well.

I paid the bank on time, I paid the government on time, paid employees on time, but everybody else had to wait three months to get paid for services. My suppliers kept us in business. I still buy wood from the same people because they stuck in with this.

When I bought the business, 90% of the wood furniture that was bought in the United States was made in the United States. Fifteen years later it went from 90 to 10%. It flipped upside down.

I look at myself not necessarily a victor but a survivor. You walk into a factory and you have people here that had worked 25 years here — they're the firefighters, they run Sunday schools. It's the fabric of what we do.