At Home Group’s (NYSE: HOME) proposed $2.4 billion take private looks like a zeitgeist transaction on paper. Hellman & Friedman‘s intent to pay a 17 percent premium for the home decor retailer reflects surging pandemic revenues. A second look at broader themes facing retailers could reveal other tailwinds for the store chain.

The transaction also exemplifies another growing trend. Covid-related backlogs and valuation swings can provide short term tailwinds for firms, but buyers are also looking for targets that match larger investment themes when selecting potential portfolio companies. Here too, At Home Group could represent a banner transaction. 

The company’s owners have been open to a sale since at least 2019, when the firm was reported to be on the block. AEA Investors and Starr Investment Holdings reportedly held an approximate 25 percent stake in the retailer after taking the firm public in 2016. Hellman & Friedman was interested in a deal back then, too, but seemed to pass even after a transaction with Kohl’s (NYSE: KSS) did not materialize. 

What’s changed? 

Earnings are up markedly since the Spring 2019 reports of initial sale interest, true: 2Q21 earnings per share were over four times the $0.34 posted in 2Q of that year. And earnings have remained relatively high since. 

But that’s just part of the story, if financial sponsors’ rhetoric about recent dealmaking themes are correct. BDO’s Spring Private Capital Pulse Survey quotes PE respondents arguing that companies posting record sales are interesting only to a point. Buyers want to see normalized earnings before committing to a deal. VSS Capital Partners managing director Patrick Turner told Mergers & Acquisitions a similar point at last week’s Best in M&A Speak interview. Covid-related backlogs are an added bonus, but VSS still looks for companies in operating niches with secular advantages beyond the pandemic’s impact, he said. 

The recent takeover could be a bet that diversification into online sales channels could provide further growth. After all, the pandemic has shifted consumer shopping habits toward increased comfort online with even larger purchases. If a focus on e-commerce is part of Hellman & Friedman’s investment thesis, At Home Group could offer fertile ground. At Home Group focuses on bricks and mortar retail. It runs 219 stores in 40 states, and all stores open in FY21 were profitable as of the end of January. The company said its current distribution network could support as many as 350 stores, providing substantial capacity if e-commerce operations taps a customer base now thoroughly comfortable with online shopping.

Alternatively, Hellman & Friedman could share Apollo Global Management’s (NYSE: APO) view that in-person retail will see a rebound. The firm announced plans to acquire The Michael Companies. in March for approximately $5 billion. Michaels stores benefited from increased interesting in crafting during quarantine.

Post-pandemic investments increasingly have a broader thesis if recent deals, including At Home Group’s take private, are any example. Ironically, the company’s previous institutional owners may have missed the boat. AEA and Starr’s common equity holdings dropped to an immaterial level by the end of January.