 Mattress FirmMattress-flipping ends badly. The US Federal Trade Commission’s decision last Tuesday to sue to block the merger of Tempur Sealy and Mattress Firm on antitrust grounds joins a tortured financial history in the world of mattresses, much of it self-inflicted by a private-equity industry that just can’t stay away. The trouble started in 1989, when the leveraged buyout of a company, called Ohio Mattress, went sideways. First Boston got stuck holding $457 million of debt it couldn’t sell — 40% of its entire equity capital — and ended up getting rescued by Credit Suisse. The episode, known as the “burning bed,” marked the beginning of the end of Wall Street’s roaring ’80s and was such a black eye that it was cited in news stories in 2023, when Credit Suisse failed, as proof that the bank was always a mess. Ohio Mattress became Sealy and was sold again in 1997 to Bain Capital, which actually made out well — so well that its profits were used to shame Mitt Romney on the presidential campaign trail. Bain sold it in 2004 to KKR, which did not. KKR pretty quickly took Sealy public, but by 2012 still owned almost half the company, whose stock had fallen 90%. An activist hedge fund attacked KKR for mismanagement and conflicts of interest, taking aim at the preponderance of private-equity executives on Sealy’s board and the hefty consulting fees that the company paid KKR. It was the first real shot fired in the battle over private-equity fees, which became a major financial story of the 2010s. Regulators cracked down, fund investors revolted, and private equity firms, under pressure, ended the most controversial practices, like charging consulting and monitoring fees. A bruised KKR quickly sold Sealy to Tempur-Pedic. The industry’s other giant, Serta Simmons, has its own long trail of Wall Street tears. It’s on its seventh private-equity owner since a 1986 buyout that ensnared a former US Treasury secretary in allegations of self-dealing. For the next two decades, Simmons was passed around like a financial hot potato until it finally went bankrupt in 2009, in TH Lee’s hands, under a crushing debt load. Ares bought it out of Chapter 11, merged it with Serta, and in 2012 sold the whole thing to Advent, which just lost its entire investment earlier because the company went bankrupt, again, in January. Serta was also the subject of an epic bit of Wall Street violence, in which Apollo sued over a 2020 debt deal that’s too complicated to get into here, but which it said “illegally usurp[ed] the sacred rights” of creditors. Bloomberg’s Matt Levine explained the case here. Trust me when I say no good comes of investing in mattresses. Venture capitalists learned that lesson in the 2010s, when they backed a series of bed-in-a-box startups with names like Casper and Nectar (total addressable market: 8 billion people!) They led a generation of direct-to-consumer startups shipping meal kits, eyeglasses, razorblades, and sneakers straight from factories. It didn’t work. Many of those companies failed and others like Warby Parker survived by embracing brick-and-mortar stores — exactly the opposite of investors’ thesis. Purple went public at $40 a share in 2021, and now trades at $1. Casper, after a short and disastrous run as a public company, is owned, naturally, by private equity. As an industry expert told The New York Times in 2009, during the Simmons bankruptcy: “How much more juice can be squeezed out of the orange?” Meanwhile, Mattress Firm — which, remember, Tempur Sealy is trying to buy now — has its own tortured financial history. In 2016 it was acquired by Steinhoff, a quasi-investment company/retailer based in South Africa for $4 billion, all of it borrowed. Sales tanked, and two years later, the company was bankrupt. Steinhoff later imploded in an accounting scandal, but not before its then-CEO called buying Mattress Firm the “biggest mistake” he’d ever made. | 
