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Case Study

Patience proves a virtue when divesting poor performer

We recommended that the parent of poorly performing consumer products subsidiary wait before divesting. We helped the subsidiary focus on restructuring and reducing the costs of the failing business. The wait paid off. Two years later, the subsidiary generated an $85M profit improvement and for 20X P/E.

  • min read

At a Glance

  • $85M profit improvement
  • 20:1 P/E ratio

The Full Story

The Situation

ConsumerCo*, the consumer products subsidiary of a major industrial products conglomerate, was under pressure to improve its poor performance trajectory. Its parent company, ParentCo*, was considering divesting ConsumerCo.

The CEO of ConsumerCo brought in Bain to evaluate its strategy, assess strategic alternatives, develop a detailed action plan and work with the management team to drive a turnaround.

Our Approach

Bain performed extensive analysis of the target business unit and its competitors in order to diagnose the problems and recommend solutions. Bain then defined the options.

Our Recommendations

Rather than divest immediately, Bain recommended that ParentCo wait two years while ConsumerCo reduced costs and restructured its business model.

The Results

After two years and an $85 million profit improvement, ConsumerCo was sold for ~20X P/E, creating significant value for ParentCo.

 

* We take our clients' confidentiality seriously. While we've changed their names, the results are real. 

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