Turnaround Case Study – A Hedge Fund Wins Control of a “Crown Jewel”

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A consumer company with sizeable regional market shares had suffered financial losses from poor plant operations and ineffective marketing strategies and implementation. The Company filed Chapter 11 and a turnaround management firm was brought in by the lending group and the 2nd lien holding hedge fund. The Turnaround Management Firm’s scope was to do an assessment and to development a plan to help the company exit from bankruptcy.

The Stakeholders

  • A $350MM US based consumer goods Company.
  • A Hedge Fund with +$2.5 billion in assets under management.
  • Several primary lending interests.
  • One of the industry’s “Finest” turnaround management firms.

Case Outcome

  • The company received an assessment and plan with profit enhancement opportunities via SKU reductions, customer profitability improvements, price increases, new “green” product introductions, reduced promotional spending and administration and enhanced promotional effectiveness and measurement. The marketing and sales plans alone created more than $25 million in annual incremental income. Additional operations improvements were also offered.
  • The Hedge Fund eventually won full control of the company through a 363 sale after prior management failed to effectively implement the plan offered to and approved by the company board.
  • The lenders recovered all of their principle when the company was sold for a premium – a premium that was generated because of the plan offered by the turnaround firm.
  • The turnaround firm saw an initial assessment and plan drafting project blossom into a nearly 2 year project for 10+ consultants. Work included oversight of the company sale process, resolution of claims asserted against the company and general management of the company’s operations. The TM firm also managed new ownership’s union negotiations, management transition and organizational redesign.
  • Because of his sales and marketing background and assessment results, Michael Roth was the key to the Turnaround Management Firm winning and extending the case. He was also the primary driver in helping the other stakeholders to realize the benefits noted above through growth related value.