4.20.2007

Increasing Market Cap Through Lean

Most lean success stories describe success in terms of operational metrics: the amount of money saved, a reduction in cycle time, an improvement in quality, an increase in throughput, and so on.


            But here’s one that’s a little different: Lean increased the value of the company.


            American Capital Strategies is a Maryland-based buyout fund. The firm recently issued a news release touting all the money they made from buying and then selling companies.


            One of those companies was Iowa Mold Tooling (IMT). American Capital invested in the firm in October 2000, then sold it in the third quarter of 2006 to Oshkosh Truck. The buyout fund realized a gain of $36 million from the sale, which a news release said was equivalent to a 25 percent compounded annual rate of return on the investment.


            And what accounted for the increase in value?


            “This excellent outcome resulted from close collaboration between the IMT deal team and our operations team,” said David Ehrenfest Steinglass, American Capital senior VP, corporate development. “This cross-functional group brought in a new management team that was able to more than double EBITDA in 18 months, through the implementation of lean manufacturing and other operational improvements.”


            American Capital has not succeeded with every manufacturing venture. The same news release also noted that the fund lost $6 million on an investment in Optima Bus Corporation, and lost $29 million on Weber Nickel Technologies, which went into bankruptcy.


            There’s no mention of whether a lean strategy was tried at either of those companies.


 

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