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(Code Name: Powerhouse)

Summary: Majority stockholder and assumed key C-level executive positions (chairman, CEO, and CFO), the US$1.5 billion turnaround of Fortune 300 Sunbeam-Oster Company.

Background: Sunbeam-Oster was a diversified consumer and professional products holding company with 26 business units, suffering from a loss of passion for innovation and performance, with once leading market shares and brand recognition in multiple channels of distribution. Sunbeam-Oster had number one or leading market shares in product categories throughout the world, with proprietary product strength in North America and Latin America, and niche product leadership in select markets in Europe and Japan; and dedicated supply chain partners in Asia, especially China. Approximately 10,000 employees.

Discovering Systemic Misconceptions: Japonica’s superstructure team constructed operating segments financial statement information that did not exist and deconstructed almost impenetrably confusing financial information to discover operations, product lines, and customer accounts that were highly profitable though thought money losing for decades, as well as operations, product lines, and client accounts thought to be highly profitable that were in fact generating large losses.

Discover Massive Undervaluation: Japonica assembled a team of well over 100 entrepreneurs and niche specialists who worked for approximately 30 months discovering value gaps based on hidden nuggets of value and transformational business plans. The combined nuggets of value extracted under Japonica management showed a downside risk of over two times on the day of acquisition with low risk high return upside value of more than four times investment cost.

Created Extraordinary Value: Japonica management created value turning around this underperforming global special situation, assuming the Chairman/CEO and other senior executive positions, and changing its culture to become entrepreneurial. Japonica senior management who assumed positions at the underperforming global special situation received no equity compensation, transaction fees, or non-shareholder approved compensation.

Investment Performance: An equity investment resulted in a 5.9x investment multiple and 104% IRR in 3 years with investment grade corporate leverage.

After conducting extensive due diligence, dozens of industry leaders and private equity firms passed on Sunbeam-Oster believing the probability of a successful turnaround was impossible citing a decade long record of losses and a rotten company culture.

Related Reading:

  1. Harvard Business School Case Study
  2. IPO Prospectus
  3. Examples of new product media campaign
  Japonica Partners ®