Business Transformation and Sale of Swan Corporation
Headquartered in St. Louis, Missouri, Swan Corporation (“Swan”) is a leading manufacturer and distributor of kitchen and bathroom hard surfaces products, including known brands such as Swanstone and Veritek. In 2015, following years of operating losses, Swan hired a broker to find a buyer or, if needed, liquidate the assets. Wasserstein Family Trust (“Wasserstein”), a subordinated debtholder of Swan, elected to engage Carnrite Group to determine whether Swan was a viable business and identify actions needed to improve performance.
Following an initial 90-day assessment, we recommended that Wasserstein take out the primary lender and assume controlling ownership of the business. Throughout the assessment, we had found a strong customer base that was loyal to the products. This loyalty, despite growing impatience with order quality and timing issues, formed the foundation for a solid business. In partnership with Wasserstein, we replaced prior management with Carnrite Group personnel, including roles of Chief Executive Officer, VP Manufacturing, and VP Sales and Marketing. Our team quickly took the following actions:
- Audited manufacturing processes to identify inefficiencies
- Conducted forensic analysis of customer and product profitability
- Prioritized and analyzed all customer and vendor contracts
- Identified various cost reduction and performance improvement opportunities, including equipment utilization, labor efficiency, employee overtime, SKU rationalization, and packaging
- Developed a 2-year roadmap to improve performance
- Made strategic investments in sales and marketing
- Renegotiated pricing with unprofitable customers
- Negotiated a 35% settlement with unsecured creditors
In parallel, we recognized a need to engage and retain the workforce, with many employees having worked for the company for years. We designed and implemented a focused effort to improve morale through cultural change focused on safety, collaboration, customer satisfaction, and results.
Key Results & Outcomes
We improved EBITDA margins from -5% to 12% within 9 months. The actions described above allowed us to reduce cost of goods sold by 6%. Following the in-depth analysis of the company’s sales channels, products, and customers, the investments in sales and marketing resulted in 40% growth to the lucrative commercial sales channel. We implemented a successful “quick ship” program for popular items. As a result of our efforts and hard work by the Swan team, Wasserstein and Carnrite Group successfully sold the company 15 months after the start of our engagement.