Fundamental Analysis of Knoll, Inc. (KNL) and its Transition to MillerKnoll (MLKN)

I. Overview of Knoll, Inc. (Historical Context)

Knoll, Inc. was a leading American design firm that produced office furniture, seating, and residential furnishings. It was celebrated for its commitment to modern design, having a rich history that placed it at the center of the modern furnishings industry alongside a few major competitors.

Business Model and Industry Position

Knoll operated primarily in the highly competitive contract furniture market, supplying businesses with office furnishings, and also had a presence in the residential and retail segments through brands like Holly Hunt and KnollTextiles.

Contract Market Focus: Revenue generation was heavily reliant on corporate spending, making it sensitive to economic cycles and major trends in office design and real estate.
Design-Centric Brand: Knoll's legacy and brand equity were significant, often commanding premium pricing due to its association with iconic 20th-century designers.

II. Pre-Acquisition Financial Performance (KNL)

A true fundamental analysis of the historical KNL stock would involve reviewing its financial statements leading up to 2021.

Key Financial Metrics (Pre-2021 Examples)

Revenue: Fluctuated with the office furniture cycle and overall economic health, experiencing a downturn during the initial phases of the COVID-19 pandemic as office renovations and new builds stalled.
Profitability (Net Income & EPS): Pre-2021 data often showed volatility. For example, some periods leading up to the merger announcement showed negative or weak Earnings Per Share (EPS), suggesting the company was facing headwinds, possibly accelerating the decision to merge.
Valuation Ratios: The Price-to-Book (P/B) ratio was generally higher than some industry peers, reflecting the value investors placed on its strong brand and design intellectual property, while the Price-to-Earnings (P/E) ratio could be unavailable or inflated due to recent earnings volatility.
Cash Flow: Operating Cash Flow (CFO) was a crucial indicator of business health, showing the company's ability to generate cash from core operations, which typically remained relatively strong before the pandemic.

The Role of the Merger

The $1.8 billion acquisition by Herman Miller was announced on April 19, 2021, at a significant 45% premium to Knoll's closing share price at the time. This premium reflected:

Strategic Value: Herman Miller's desire to combine two of the industry's most influential and complementary portfolios to create a market leader with unprecedented scale.
Synergies: The expectation of $100 million in run-rate cost synergies within two years, primarily from integrating supply chain, procurement, logistics, and administrative functions.
Market Positioning: A combined entity was better positioned to address the evolving "resimercial" market—a blend of residential and commercial design—accelerated by the shift to hybrid and remote work.

III. Post-Merger Fundamental Analysis: MillerKnoll, Inc. (MLKN)

The fundamental analysis for the former Knoll shareholder is now an analysis of the merged entity, MillerKnoll (MLKN).

A. Business and Competitive Landscape

MillerKnoll is the preeminent leader in modern design, controlling a collective of brands including Herman Miller, Knoll, Design Within Reach (DWR), HAY, Muuto, and Maharam.

Increased Scale and Reach: The combined company has a much larger global footprint, a broader portfolio across contract and retail channels, and enhanced e-commerce capabilities. This scale provides leverage in sourcing and distribution.
Market Trends: MLKN is highly susceptible to two major trends:
- Return-to-Office: The demand for new office configurations (e.g., collaborative spaces, ergonomic setups) drives the core "Contract" business.
- Work-from-Home/Residential: Brands like DWR and Muuto cater to the continued investment in high-quality home office and residential furnishings.

B. Financial and Valuation Metrics (MLKN)

Analyzing MillerKnoll involves looking at its consolidated performance since the merger.

Metric	Significance	MLKN's Post-Merger Reality
Revenue	Total sales generation.	Consolidated revenues are significantly higher than the individual companies, approaching $3.6 billion pro forma initially, but growth is now key.
Gross Margin	Efficiency in production and sourcing.	Synergies and scale are expected to drive improvements, though supply chain volatility can be a counteracting force.
Adjusted EBITDA	Operational profitability before non-cash items.	A target of approximately 16% margin was projected, driven by the synergy capture, making EBITDA accretion a key post-merger success factor.
Debt & Leverage	Financial risk associated with the acquisition.	Herman Miller financed the cash portion of the deal, increasing the combined entity's debt load. Managing debt and maintaining a healthy balance sheet is crucial for the combined company.
Dividend Policy	Return to shareholders.	MillerKnoll has a stated commitment to its dividend, making its dividend yield a point of interest for income-focused investors.

C. Synergy Execution and Risks

The success of the Knoll acquisition is fundamentally tied to the execution of the promised synergies.

Cost Synergies: The $100 million target is a significant component of the deal's value. The ability of the management team (led by former Herman Miller CEO Andi Owen) to realize these savings in procurement, logistics, and administrative overhead is a primary focus for analysts.
Revenue Synergies: Beyond cost savings, the combination aims for cross-selling opportunities across brands and channels. For instance, offering Knoll products to Herman Miller's strong global dealer network, and vice-versa.
Integration Risk: The major challenge for the merged entity is cultural integration. Merging two legendary design rivals without diluting the unique brand equity of either Knoll or Herman Miller is a significant long-term risk.

Conclusion: Investment Perspective on the Legacy

The stock of Knoll, Inc. (KNL) is no longer tradable. The fundamental analysis shifts entirely to the performance and valuation of MillerKnoll, Inc. (MLKN).

For an investor who held Knoll shares, the immediate return came via the premium paid in the acquisition. For those now holding MLKN shares:

Bull Thesis: The company is an undeniable market leader with unrivaled scale and a collection of premium, complementary brands. Successful execution of cost and revenue synergies, combined with a post-pandemic recovery in global office spending, makes MLKN a strong buy on dips.
Bear Thesis: The integration is complex, the office furniture market faces secular challenges from permanent remote work shifts, and the high debt load from the acquisition limits flexibility in a potential economic downturn.

The long-term value creation depends not on Knoll's past, but on MillerKnoll's future success in transforming the global landscape of how people work and live.

WorldReview1989

Wednesday, October 1, 2025