Meet Nexus Capital, the private equity firm that wants to save Big Lots

Macroeconomic factors such as high inflation and interest rates challenged the company because its discretionary categories, such as home and seasonal products, represented a significant portion of its revenue, the company said.

Court filings showed the sale price would be about $760 million, per CNBC. Through the court-supervised sale process, the company plans to close more additional store locations and continue to optimize its supply chain; last week it disclosed it would close a Columbus, Ohio, distribution center and lay off almost 400 employees.

Evan Glucoft, managing director of Nexus Capital, said in the release that the firm will “help return this iconic brand to its status as America’s leading extreme value retailer” and that the business “has incredible potential and we are confident that its greatest days are ahead.” Attempts to reach Nexus Capital executives for comment on this story were unsuccessful, and a Big Lots representative declined to comment.

Big Lots reported major losses in recent quarters — including $205 million in the first quarter — and has used hundreds of millions of dollars of cash since 2022 to fund operations. The retailer’s sales had declined for three consecutive years: 1% in 2021, 11% in 2022 and 14% in 2023.

Last quarter, the company said it had “substantial doubt” about its ability to continue operations. Analysts have said that the company hasn’t delivered on its thesis of offering good value.

Now, it looks like Nexus Capital could give the company a second chance to return to growth.

How Big Lots could change under Nexus

It’s yet to be seen exactly how Nexus Capital would reshape the struggling retailer, especially being one of its first investments in a national brick-and-mortar retail chain and possibly its first at the scale of Big Lots — which, as of the first quarter, had 1,300-plus stores in 48 states.

Apollo Global Management veterans Michael Cohen and Damian Giangiacomo co-founded Nexus Capital in 2013. Since then, the firm has made investments in a wide variety of sectors: business services, chemicals/industrials, defense, retail, e-commerce and education. The firm typically invests in transactions of up to $300 million, according to its website, though the Big Lots deal would be much larger than that.

Investments have included Dollar Shave Club, floral arrangements provider FTD, retailer Lamps Plus, DTC vitamin-gummies brand Sugarbear and Toms shoes, among others.

“A lot of times they’ll want to find synergies within their portfolio of companies, and perhaps they can cut costs and run Big Lots more efficiently because they own other retail or retail-like assets,” Seth Kleinman, a partner for Morrison & Foerster LLP and a member of its business restructuring and insolvency group, said in an interview.

Many of Nexus’ portfolio companies have made big changes since its investment, though it is hard to point exactly to which moves have been influenced directly by the firm.

Since Nexus bought Dollar Shave Club in 2023, the company cut its tech spending by 40% by switching from its own e-commerce platform to Shopify, according to Shopify. Toms Shoes, which Nexus Capital and other creditors took ownership of in 2019, has switched up its marketing strategy, advertising more on podcasts, via streaming and at live events. Lamps Plus, in which Nexus made an investment in 2022, brought on a new CEO at the end of 2023 and shut down its 45-year-old wholesale arm Pacific Coast Lighting this year. Floral delivery company FTD, which Nexus bought out of bankruptcy in 2019, has diversified its product lineup and made it easier for florists to fulfill same-day deliveries.

“I think Nexus has a good reputation for being a hands-on partner for these firms,” said Daniel McCarthy, an associate professor of marketing at the Robert H. Smith School of Business at the University of Maryland. He has focused his research on customer-based corporate valuation and DTC businesses, like those owned by Nexus. “I do think that to the extent that they have a lot of prior expertise from these other acquisitions, I think it kind of creates opportunities for them and for the companies that they invest in to create growth together.”

One CEO, though in a completely unrelated field, made comments that also might ease some fears about a private equity takeover of Big Lots. In April, Nexus bought ACT, the nonprofit testing company that oversees one of the major college admissions exams, and made it a for-profit organization. ACT’s CEO Janet Godwin said that when bringing on Nexus, she was adamant about not enlisting the type of private equity company “you hear horror stories about,” focused on cutting costs.

“That’s not who Nexus Capital is,” Godwin said in a USA Today story. “They invest for long-term growth.”

So far, optimism for Big Lots

At this point, it’s less important who the buyer is and more important that there is one as it gives the company some financial stability moving forward, said Neil Saunders, managing director of retail for GlobalData.

“If no further bids come forward, it is a backstop for Big Lots that means it will survive in some form or another,” Saunders said in an email. “As a firm, Nexus has made quite a few investments in consumer facing businesses, including some retailers, so there is a degree of fit here. That said, Big Lots has many problems so there is a lot of work required to get it back on track.”

In the shadow of several notable closures of big retail chains this year, like Bob’s Stores and Conn’s HomePlus, and other notable bankruptcies, such as LL Flooring (formerly Lumber Liquidators) and Express, Kleinman said it is a good sign for the company both that it is not a liquidation and that Nexus is willing to go through the process to be a stalking horse.

“It’s a really good prospect for the company versus just a bunch of bottom feeders coming in and trying to get it at the absolute lowest price,” he said.