How Mitt Romney's Firm Transformed A Struggling Company, In 5 Steps | WAMU 88.5 - American University Radio

How Mitt Romney's Firm Transformed A Struggling Company, In 5 Steps

Play associated audio

Mitt Romney says his experience in private equity taking over troubled companies would make him a good manager of America's economy. So we're reporting on companies that Bain Capital bought while Romney was in charge of the firm. This morning, we told the story of one that went bust. Here's the story of one that succeeded.

How A Private-Equity Firm Turns A Company Around

Step 1: Find a little company that's lost inside a big company.

In 1995, Wesley Jessen was a struggling division of Schering Plough, a big drug company. "We were not a very profitable company at all," says Bill Flynn, who worked in Wesley Jessen's finance division at the time.

Wesley Jessen had a valuable patent for color contacts. Michael Jackson wore Wesley Jessen color contacts in the Thriller video.

But the color contact lenses they made were the kind that you kept for a year. When disposable lenses got popular, Wesley Jessen couldn't keep up.

Bain saw potential in the company. So they came in and bought it. Like most private equity deals, it was done mostly with borrowed money. Bain put $6.5 million down, and borrowed another $43 million.

Now, they had to pay interest on all that debt, while turning the company around. The key to doing so:

Step 2: Hire the right leader.

Bain brought in a guy named Kevin Ryan to run Wesley Jessen. He's widely admired as a smart, charismatic, hard-working exec.

Right off the bat, Ryan temporarily halted all manufacturing. Doctors had been stuck with a glut of color contacts, and Ryan asked them to send back what wasn't selling.

"What that did was make for an inventory nightmare," says former controller, Ron Artale. "But-- it made for a lot of credibility with the doctors."

Step 3: Focus on the customer.

Lenses were being sent out in packs of three — oddly, given that people have two eyes. Ryan changed it to packs of six. He cut prices and expanded the sales force all over the country to figure out what the doctors wanted.

Step 4: Focus.

The company had a plant in Puerto Rico making conventional lenses that weren't selling well. Ryan saw that colored contacts were the company's key niche, so he had the plant start making custom lenses. One popular product was "Wild Eyes" — lenses with thunder bolts,concentric circles, yellow lenses. For Halloween. Wild Eyes were a hit.

To expand Wesley Jessen's business, Bain borrowed approximately $70 million to buy another company, Pilkington Barnes-Hinds, with international capacity.

Step 5: Reward.

In 1997, Bain took Wesley Jessen public. Executives and managers, who hadn't received a raise since Kevin Ryan showed up, got bonuses and cashed in the stock options they'd received instead. Workers received cars and other prizes.

Wesley Jessen was ultimately bought by another company, Ciba Vision. Bain walked away with $300 million.

Not all of Bain's deals turned out this well — a number of the firm's investments end in bankruptcy. But Wesley Jessen is still in business today.

Copyright 2012 National Public Radio. To see more, visit http://www.npr.org/.

NPR

With Swirls Of Steel, These Sculptures Mark The Passage Of People And Time

Albert Paley's eye-catching gates, archways and sculptures frame transitions and elevate otherwise routine paths. An exhibit in Washington, D.C., is celebrating the work of the American metalsmith.
NPR

Some Food Producers Are Quietly Dumping GMO Ingredients

But even as they create GMO-free products, many of these corporations are fighting state initiatives that would require them to give consumers more information about their ingredients.
NPR

Rubio: U.S. Cannot Admit All Children Seeking Asylum

Florida Sen. Marco Rubio tells NPR the nation can't "absorb" all migrants fleeing violence and must secure its own border first. He dismissed potential 2016 rival Hillary Clinton as old news.
NPR

North Korea Is Not Pleased: Dance Video Features Kim Jong Un

Citing a threat to the leader's dignity, North Korea reportedly asks China to block a video that inserts Kim Jong Un's image into bizarre situations, all set to a bouncy dance track.

Leave a Comment

Help keep the conversation civil. Please refer to our Terms of Use and Code of Conduct before posting your comments.