RT Journal Article
SR Electronic
T1 J&R Machine, Inc.
JF The Journal of Private Equity
FD Institutional Investor Journals
SP 122
OP 127
DO 10.3905/jpe.2007.682351
VO 10
IS 2
A1 David C. Finkbiner
YR 2007
UL https://pm-research.com/content/10/2/122.abstract
AB J&R Machine Inc., a small machine shop in Wisconsin, faced all the problems of any Midwest manufacturer—deteriorating gross profit margins, negative fallout from the 9/11 attacks, major sales/customers being lost to Mexico and China, and unprecedented rising steel prices. By the end of 2003, its annual losses escalated to 15 percent of sales, and negative book equity was 46 percent of assets. Cash was gone, accounts receivable were fully factored, inventories were immaterial, and accounts payable were averaging 106 days. There was no visible liquidity. It had no product line, no brand name and no identifiable intangibles to sell or leverage. There was no available collateral to attract a new lender or enough of a business or time to find a buyer. Liquidation would yield 88 percent for the secured debt. Yet, J&R was saved with no loss of jobs, no loss of ownership, and a 100 percent recovery for 91 percent of the unsecured debt. This amazing turnaround won the author the 2006 Small Company Turnaround of the Year Award from the Turnaround Management Association. The universal principles, strategies and actions are lessons for those trying to achieve a maximum win-win outcome with their next seemingly impossible turnarounds.TOPICS: Private equity, performance measurement, financial crises and financial market history, portfolio construction