Successful Turnaround & Exit for a Specialized Manufacturer
The Swan Corporation
A NYC-based private investor group holding subordinated debt in Swan Corporation, a leading manufacturing and distribution company of kitchen, bath and utility room products, was dissatisfied with the prospects for the business following several years of declining sales and operating losses. Faced with a decision to either walk away and cut its losses, or to double down, the private investor engaged Carnrite to determine whether Swan was a viable business and if so, what it would take to turn around and stabilize the business and return it to profitability.
Carnrite assessed Swan’s business and organizational capabilities, in particular:
- Analyzed customer base and product profitability
- Rationalized product and asset portfolio
- Audited manufacturing process & logistics for inefficiencies
- Identified multiple cost reduction opportunities, including a reduction in outside legal and accounting services costs, negotiating discounts and revised terms with vendors
Following its initial 90-day assessment, Carnrite recommended the private investor take out the primary lender/banks, purchase the company’s assets, and assume ownership and control of the business.
Key Results & Outcomes
- Partner Negotiations – Resolved 35% settlements with unsecured creditors; realizing over $4MM in cost savings
- Improved Manufacturing & Logistics Process – Reduced COGS by 6%; increased plant & labor efficiency; reduced overtime; increased safety focus; rationalized SKUs
- Focused on Full Truck Load vs. Less than Truck Load shipping; improved packaging to decrease damages & returns
- Strategic Investments in Sales & Marketing – Restructured and expanded the sales team, increasing focus on commercial sales channel, driving a 40% increase in sales
- Renegotiated pricing agreements with unprofitable customers
- Sustainable Change through Culture – Improved company morale significantly by fostering a culture focused on collaboration, safety and results
- Improved EBITDA – Within six months the company saw a major shift in comparable year-to-date EBITDA as a percent of net sales, from -5% to +5%
- Within 9 months it rose further to 12%
- Within 15 months of engaging Carnrite, Swan Corporation returned to profitability and was sold to an industry consolidator, yielding returns that significantly exceeded the private investor’s expectations.
Carnrite’s Unique Value Contribution
The Carnrite Management team recognized a strong, loyal customer base that had turned to competitors due to Swan’s inconsistent quality, delivery performance and uncertainty created from ongoing financial distress. Carnrite pinpointed a number of inefficiencies both on the manufacturing line and within the business organization that, if remedied, would not only return the company to viability but make it a candidate for long-term growth and sustainability. Carnrite designed the roadmap to define 6-month, 1-year and 2-year initiatives for Swan management to complete the turnaround, and installed an experienced executive team, led by Carnrite personnel (including CEO, VP of Manufacturing, and VP of Sales), to provide the necessary leadership and skills to motivate the workforce and improve performance.