"It was one of those ‘in a New York minute’–type of things,"
Hooker recalls. After selling acoustic ceiling tiles in Jacksonville, Fla., he
learned about table and bed covers directly from Sferra. "I just started growing
the business," he says. "It could have been a widget company. I had a business
degree and an idea of what I wanted to do." However, as the business expanded, he began to fear that if
anything happened to him, his family would be obligated to sell the company to
pay the estate taxes. That concern also loomed large for Matouk, now 69, who
began to develop health problems. When they first began receiving offers from private equity fund
managers, Hooker and Matouk turned them down as a reflex. But it was Hooker’s
son Matthew who suggested that he take some meetings, even if he didn’t want to
sell. The privately held company’s annual revenues totaled roughly $30 million,
but the partners had never tried to place an actual value on the business and
its assets. Ironically, after they determined a market price, they were able to
work on a plan for the future. Hooker recalls the day last year when he and Matouk left the
Madison Avenue offices of a private equity fund in a daze. The two men had
guessed the fund managers would value their business at a multiple of EBITDA—and
calculated a range between $8 million and $15 million. But when they received an
offer in that range, they suddenly had to consider real figures and form some
concrete plans. "I pitched George," Hooker says. "I said, ‘My kids are in their
20s—all college graduates—we have one house and a very simple lifestyle, but God
forbid something happens to you or me. There is no value on this business right
now, and with estate taxes taking 55 percent, we’re screwed.’" Hooker eventually
offered to buy out Matouk’s share, an option they had discussed previously. Now
it became reality. In the fourth quarter of 2006, Hooker and Matouk signed a
formal acquisition agreement. But the matter of who will take over still remains. Hooker
would like to retire in five years and become a part-time advisor to the
company, while devoting the bulk of his time to Challenged Youth Sports, a
nonprofit program for developmentally challenged children that he and Margo
started in New Jersey in 1990. To keep Sferra running when he is no longer chief
executive, he has assembled a senior management team led by Ann Henry, a former
executive at Martha Stewart Living Omnimedia. "I don’t want to force any of my children to come into this
business—I really don’t care, they’re doing fine," Hooker says. But if any of
them decide to join the business, the company will make room. They will
eventually inherit the estate, but Hooker is considering an employee
stock-option plan. This would literally create an ownership culture—and could
also allow Hooker to obtain equity from the company because employees would buy
or earn shares in it.
Elizabeth Harris is a staff writer for Worth.
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