A competitor joins the flock at children's boutique chain Nesting House

New partners Angela Shaw-Halperin (left) and Jen Kinka in the Nesting House store on Baltimore Avenue. The two had been competitors, with stores selling natural products for children.

Tips on preparing for a small-business merger:

  • Visualize what the combined business will look like.
  • The principals of each should work on a project together to learn each other's style.
  • Decide what you are going to do to retain the customers of the business that will be dissolved in the merger.
  • Have a naming strategy for the surviving business.
  • Assess whether the skills of the merging partners are complementary.
  • Have an exit plan for principals who decide to leave, post-merger.
  • Source: Ellen Weber, executive director of Temple’s Innovation and Entrepreneurship Institute

This is an emotional time for Angela Shaw-Halperin. The South Philadelphia mother is losing one of her babies: Cloth, the natural-products children's store on Passyunk Avenue that Shaw-Halperin and her husband, Shai, opened in June 2013 to serve an unmet need in their neighborhood.

At the time, only one other store of its type existed in Philadelphia: the Nesting House, which parents Christopher and Jennifer Kinka opened in Mount Airy in June 2010 with an even more unique offering. They gave customers the option of turning in children's clothing for cash, or for store credit on gently used clothing or other items.

But a month after Cloth's debut, the Nesting House creep began. The Kinkas opened a second store, in Collingswood in July 2013, and a third, two years later in West Philadelphia.

"Our sales were able to remain steady, but even so, it was a concern," Shaw-Halperin recalled.

Yet when Jennifer Kinka sent her an email a year ago proposing a partnership, Shaw-Halperin was "very flattered ... but I said to my husband, 'No way.' I was being very protective of my brand. That was my first reaction."

They kept talking, though. And on Feb. 14, Cloth celebrated its final day of business, set to reopen Feb. 18 as the region's fourth Nesting House.

Days before the transition, Shaw-Halperin was sounding like a parent watching her child head off to college.

"It's kind of like all of a sudden my store grew up," she said, sounding both melancholy and excited.

Independently growing Cloth beyond its one-shop footprint "would have taken a long time, and it would have taken a lot of energy," Shaw-Halperin said. The "creative partnership" with the Nesting House enables her "to see Cloth become what I always wanted it to be, but it's happening overnight," said the 39-year-old mother of son, Elliot, 6, and daughter, Liv, 2.

She praised Jennifer Kinka, 38, a mother of three children under 11, as having "figured out something that makes herself successful and can be replicated."

For the Nesting House, gaining Cloth fulfills "a very specific vision of having a network of people and resources that is across the city, so it's accessible to lots of people," Kinka said.

There was a personal draw, too: Kinka and Shaw-Halperin have worked together on the production of the Great Cloth Diaper Change, a worldwide annual promotion of cloth diaper use.

"I saw her work ethic; I saw her passion," Kinka said. "I felt we would be stronger together than divided."

Though "most times mergers don't work well in terms of both entrepreneurs don't stay on," those that are well-researched can, especially if the partners "acknowledge each other's skills," said Ellen Weber, executive director of Temple University's Innovation and Entrepreneurship Institute. 

Having "blindsided" Shaw-Halperin with a proposal to join forces, Kinka "had to have a lot of patience with her process" in coming around to saying yes, and "build in a lot of securities for her," including a stake in the business.

Without providing specifics on the deal or the financials of either company, Kinka said the Nesting House took on Cloth's debt and has agreed to pay Shaw-Halperin more than what it would have paid an outside hire. Shaw-Halperin will manage the South Philadelphia store and lead a new natural-baby division at Nesting House.

"We both had to be very generous in what we were willing to accept and give," Kinka said. "But I think it's going to be awesome."

So does Shaw-Halperin, who had three part-time employees and "will not miss the stress of having all the responsibility."

She ticked off a litany of her jobs at Cloth: purchasing product; keeping track of inventory; handling customer service, shipping, and email inquiries; and maintaining the website.

"It's too much for one person to do," said Shaw-Halperin, whose husband took a full-time job a year ago as e-commerce manager for Di Bruno Bros. gourmet cheese and catering business, leaving her with more work at Cloth.

The Nesting House has 14 employees, all part time with the exception of a general manager.

Kinka was feeling stretched, too, "finding my job was getting too big for me to do all parts of it really well."

To lighten that load, the Kinkas sold the Collingswood store in January to the woman who was managing it for them, Melanie McGovern, a yoga teacher who lives in town. The store will remain under the Nesting House brand.

Among those expressing support for Cloth and the Nesting House joining forces is Patricia Blakely, executive director of the Merchants Fund, a nonprofit that financially supports small businesses. In recent years, each business has received a $10,000 grant from the fund to help build inventory, Blakely said.

"Cloth and Nesting House is a natural merger," she said. "Buying power is critical in retail, so this is a win-win for both companies."